When Timothy Oduor, a middle-aged man working for a transportation company in East Africa, got an offer to sign up for a credit card, he took it.

The card, issued to him by an aggressive sales person representing the interests of a local commercial bank, gave him a credit limit of $600.

The contract stipulated that all the card debt could be recovered in full from his salary account at the end of each month.

For several months the card transactions ran smoothly;  Oduor did all his monthly purchases with the card and left some cash in his account to settle the card debt in full. However, when the bank revised the contract so that it could only recover 50 percent from his account and with the remainder to be settled by a direct cash payment at the bank’s card center, things fell apart.

“I begun to fall back on my card debt repayments, forcing the bank to cancel the card and pass the matter to its debt-recovery department,” Oduor told AFKInsider.

To save himself from being blacklisted by credit reference bureaus, he was forced to borrow from another bank to clear the card debt.

An increasing number of Kenyans are opting for the convenience of plastic money. Card company giants in the past have focused on salaried individuals or those in formal employment, leaving a huge chunk of the population excluded.

But this is slowly changing as notable players shift their attention to those on the lower end of the income pyramid, the self employed and those operating on the fringes of Kenya’s informal economy.

In January, retailer Equity Bank Group signed a partnership with MasterCard to introduce five million debit and prepaid cards in the market, a significant move to address financial exclusion.

MasterCard is working with partners in the financial sector to encourage a shift to electronic payments, which is a more secure and convenient platform than keeping money under the bed. However, this informal card market remains untapped with many unbanked people still out of the loop.

Consumer bankers who spoke to AFKInsider argue that most people think credit cards are free cash that is used and never repaid. Most people who use credit card don’t have the financial discipline required to use them. This is why they soon run into debt.

According to Central Bank of Kenya, 10.7 million plastic cards are circulating in Kenya, up from 10.1 million in 2011. Use of ATM, credit, debit cards and point of sale terminals grew strongly in 2012 compared to 2011.

It is estimated that out of the more than 10-million cards circulating in Kenya, the total number of unsecured credit cards stood at 140,000 by December 2012.

Kenya’s card business could change with the entry of a new player that does not require one to have a bank account.

Brett Van Aswegen is managing director of cards at AFB Consumer Finance Business. The company is making its debut in Kenya at a time when a large unbanked segment of the population is still cut off from the plastic cash market.

“Unlike what is available in the market that is either prepaid or linked to a bank account, our credit card is unsecured and does not require one to have a bank account,” Van Aswegen said. “A card holder can make card repayments through the mobile phone for an extended period of up to six months.”

While it can take two-to-four weeks to obtain a credit card from a bank, the turnaround time for those applying for an AFB credit card is 24 hours, Van Aswegen said. The application process is simple and involves obtaining an ID number and other verification processes such as employment status, Van Aswegen in an interview with AFKInsider.

The AFB credit card targets those in the informal sector and self employed, segments where some are still cut off from financial services.

While AFB is still growing its network, it has already signed up with more than 105 merchants and retail partners ranging from supermarket chains and cell phone dealers to footwear retailers and opticians.

Purchase transactions are authorized via AFB’s card device and AFB settles the transaction amount directly into the retailer’s bank account. The retailer carries no risk. The purchase value is debited to the customers AFB account and spread over six months. Monthly payments can be repaid in the retailer’s store, which helps support AFB’s retail partners by increasing foot traffic and repeat spenders in their stores.

The Consumer Finance Company has chosen Kenya as its entry point to the East African market due to its relatively well-developed financial and retail sectors supporting an educated and growing middle-class.

Huge opportunities exist in Kenya’s card business, attracting interest from MasterCard and Visa International.

James Wainaina, vice president and regional head of MasterCard East Africa spoke to AFK Insider.

“Growth in cashless payments in Kenya has come as a result of government enhancements to the payments ecosystem,” Wainaina said. “This is in addition to disruptive technological innovations and other market forces.”

With a rapidly growing middle class, Kenya has seen growing interest in the cashless space setting off a proliferation in locally issued debit cards. Government e-payment initiatives have also begun to direct benefits programs onto card based platforms.

“Innovation in the payments sector presents an opportunity for the development of market-relevant and customer-focused initiatives that enhance the use of plastic money in the country,” Wainaina said.

He added that with an increasing smart-phone penetration in Kenya, there is an opportunity for more contactless payments in the market. MasterCard is already pioneering solutions in this area including MasterPass, a digital service that brings together all of the ways we pay for things, from traditional plastic cards to digital wallets, and gives consumers the ability to make a payment from wherever they are and with one simple, consistent experience.

At Mobile World Congress 2013, MasterCard announced the launch of MPOS (Mobile Point of Sale) technology to Kenya, as a result of a partnership with Equity Bank and Ezetap.

MPOS allows merchants to receive payments via low cost add-ons linked to secure applications on their portable devices. This technology will extend the security and convenience of electronic payments to merchants and their customers who previously depended on cash.