The Central Bank of Kenya (CBK) Governor Patrick Njoroge has warned Kenyans against embracing the use of online mobile loan apps.
In yet another tough statement about digital lenders, CBK Governor has termed them as dangerous and capable of bringing down the entire financial sector in Kenya.
“We are basically playing with a match stick in a petrol station because the online lenders are enough to bring down a whole financial sector,” said Mr. Njoroge.
Initially, the Governor of the CBK had termed the digital lenders in Kenya as shylocks who have capitalized on digital platforms to exploit Kenyans with high interest-rates micro-loans.
According to Mr. Njoroge, online lenders are a major and potential problem and that they have to be regulated to shield the consumer.
There have been calls on the Central Bank of Kenya to regulate mobile lenders in the country. CBK is the only institution mandated by law to regulate financial institutions and protect the consumer.
Currently, CBK regulates commercial banks, microfinance institutions and Saccos but has no control over digital lenders.
Kenya has over 500 digital lenders who issue micro-loans to Kenyans at a varied interest-rate. The lowest interest rate for an independent mobile lender has been quoted at 7.5 percent with the highest standing at 35 percent.
Digital lenders are the reason 2.7 million Kenyans have been blacklisted by various credit reference bureaus (CRB).
Of the blacklisted Kenyans, 500,000 of them owe digital lenders 200 shillings and below raising concerns among Kenyans, as well as the government.
Digital lenders in Kenya form less than one percent of financial services but according to the CBK Governor, they are more dangerous than anything else to the entire financial sector.
“These entities are currently not regulated by CBK and concerns have risen over data protection, privacy and the sources of money,” said Mr. Njoroge.
According to the CBK Governor, digital lenders might be being used for money laundering and called on Kenyans to avoid them.