Mobile phone lenders risk closure in CBK Bill

Digital mobile lenders will have six months to be licensed by the Central Bank of Kenya (CBK) if Parliament adopts a proposed law that will see the regulator control their products, management, and sharing of borrowers’ information. This seeks to empower the banking regulator to supervise digital lenders for the first time in order to curb the steep digital lending rates that have plunged many borrowers in a debt trap as well as predatory lending.

The banking regulator will be expected to determine minimum liquidity and capital adequacy requirements for digital credit providers akin to conditions set for operating a bank in Kenya. It will also seek to push out rogue players amid concerns of unethical practices such as money laundering, illegal mining of customer private data and shaming of borrowers who default on repayment.

Tens of unregulated microlenders have invested in Kenya’s credit market in response to the growth in demand for quick loans. Their proliferation has saddled borrowers with high interest rates, which rise up to 520 percent when annualised, leading to mounting defaults and an ever ballooning number of defaulters. Analysts reckon that a majority of the fintechs will struggle to meet the tough licensing conditions.