Kenya is preparing to crack down on a flood of high-interest loan apps

The large number of digital loan platforms in Kenya has caused a stir in the authorities, for which a new project has been created to license and regulate digital lending platforms in the country. The new bill seeks to have the CBK, the country’s monetary authority, license and regulate digital lenders. Currently, the authority licenses, regulates and supervises deposit-taking institutions. Digital lenders have escaped the CBK’s scrutiny thus far because they don’t take deposits.

Since the launch of the mobile-based loans products in 2012, dozens of lending apps have popped up offering short-term loans, and with many selling the goal of financial inclusivity. Financial inclusion rose from 26.7% in 2006 to 82.9% in 2019 in Kenya, driven largely by the growth of mobile money. Also, 13.6% of Kenyans had borrowed loans from a digital lender. However, some apps offer loans with annual percentage rates of up to 400%, and borrowers have accused them of shady practice.