Blow To Digital Lenders As MPs Direct CBK To Start Regulating

Digital lenders in Kenya will soon feel the heat of regulation and control from the Central Bank of Kenya following a directive from members of parliament.

Digital lenders in the country have been enjoying the freedom of being unregulated leading to some of them charging exorbitant interest rates to Kenyans thirsty of instant loans.

The directive by members of parliament will see more than 500 digital lenders have their interest rate regulated.

Members of Parliament, also, want the Central Bank of Kenya to ensure that digital lenders are controlled by the interest capping law that was introduced in 2016. The CBK’s benchmark rate stands at 9 percent with the law giving lenders to charge four points above it.

List of 10 digital lenders in Kenya

1. Tala
2. Stawika
3. Branch
4. Okash
5. KCB M-Pesa
6. M-Shwari
7. Saida
8. Okoa Stima
9. Kopa Chapaa
10. Timiza

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How Some Digital Lenders Have Made Kenyans Slaves

There are more than 42 mobile loan apps in Kenya and that is both a blessing and a curse to thousands of Kenyans, with the majority being the young and unemployed youth. In total, there are more than 500 lenders in Kenya who issue loans via digital platforms.

Stats show that more than 500,000 Kenyans are listed on the CRB, 80 percent of them being the youth who either delayed or failed to pay back their mobile loans.

Many Kenyans are not able to access traditional loans from commercial banks given the long and tiring processes that are involved.

All banks often require the borrower to offer them security and have a sound financial record as an assurance that they will be able to service the loan if granted. The time involved before getting a loan from a commercial bank has also acted as a catalyst to drive thousands away.

The coming into effect of the interest rate capping law just made matters worse. Most banks refrained from lending to Small Medium Enterprises (SMEs) as well as individuals because they were considered risky. The only savior that came at the time of need is the mobile loan apps that are now thriving in Kenya.

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