The Central Bank of Kenya(CBK) has directed unregulated digital lenders to cease operations in the country following the lapse of the 6-month registration period that required them to comply with the Digital Credit Providers regulations.
Under the regulations, all digital lenders were expected to apply for licenses from the banking regulator before September 17.
Gazettement of the regulations follows the signing into law of the Central Bank Act, 2021 in December, bringing digital lenders under the watch of the banking regulator for the first time.
This is due to concerns raised by the public about the predatory practices of digital lenders, among them, high costs, unethical debt collection practices, and the abuse of personal information.
The lenders had also been accused of not disclosing the full terms of their credit leading to costly interest rates that rise up to 520 percent when annualized.
Under the new regulations, the lenders are barred from sharing borrowers’ information with third parties and they are also required to seek CBK approval for interest on their loans.
They will also be required to disclose all terms of their credit to borrowers.
So far, the Central Bank of Kenya has licensed 10 applicants as digital credit providers, pursuant to the CBK Act and the Regulations.
These include Ceres Tech Limited, Getcash Capital Limited, Giando Africa Limited, Jijenge Credit Limited, Kweli Smart Solutions Limited.
Others are Mwanzo Credit Limited, MyWagepay Limited, Rewot Ciro Limited, Sevi Innovation Limited and Sokohela Limited.
“Other applicants are at different stages in this process, largely awaiting the submission of requisite documentation. We urge these applicants to submit the pending documentation expeditiously to enable completion of the review of their applications,” said CBK.
During a briefing in March, CBK Governor Patrick Njoroge said that the regulations will bring sanity into an industry that has for years been blamed for predatory lending and debt-shaming borrowers in a bid to recover defaulted loans.
Digital firms have in recent years flooded the local market, attracted by the demand for quick credit that does not require collateral.
Borrowers get loans within minutes via their mobile phones, making digital loans a quick fix for daily bills.
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