Branch Mobile Loan App is buying majority stake in Century Microfinance Bank Limited.
Branch becomes the first mobile lenders to enter into the mainstream banking.
There was a time Kenya was ruled by mobile loan apps. According to the Central Bank of Kenya, there are over 500 mobile lenders in Kenya.
Kenyans embraced mobile loan apps for their borrowing given that almost all of them do not require security or any form of paperwork, but bank on 90 percent trust of the borrower.
The only lifeline for mobile lenders in Kenya was that they had powers to list and blacklist defaulters on the Credit Reference Bureau (CRB).
But the CBK took away powers to blacklist defaulters on the CRB by mobile lenders. This directive crippled the majority of them. Hundreds moved out of business.
At least 3.7 million Kenyans are blacklisted on the CRB. 500,000 of them are said to owe 200 shillings and below and were blacklisted by mobile lenders.
To survive and to avoid being seen as digital Shylocks who capitalize on the desperation of millions of Kenyans to charge high-interest rates, Branch Mobile Loan App is now going mainstream.
The regulator has already given a go-ahead to Branch to acquire 84.89 percent shares in Century Microfinance Bank Limited.
The Gazette notice dated May 7 reads:
“Pursuant to the provisions of section 46 (6) of the Competition Act, 2010, it is notified for general information that in the exercise of the powers conferred upon the Competition Act, the Competition Authority has authorized the proposed transaction as set out.”
Both parties have agreed to maintain existing loans in their loan books that exist by the time of the agreement until the expiry of such loans.
Branch Mobile Loan App is among popular lending apps in Kenya that have been offering loans to millions of Kenyans on a daily basis.
Century Microfinance Bank Limited is a microfinance lender that has been majoring in providing financial solutions to individuals and small-medium enterprises (SMEs).
The National Assembly passed a bill that seeks to regulate mobile lenders in Kenya, a move that could see the majority of them who have been charging high-interest rates close shop.
“Moving into mainstream banking is a strategic move for Branch. Business is about seeing the future. Am sure they have seen the future and realized that there is little hope in their line of business,” said James Nabutola, a business analyst and teacher.
There has been a conversation as to whether mobile lenders in Kenya should be regulated. The Central Bank of Kenya insists that they should be regulated.
Mobile Loan Apps in Kenya have been associated with money laundering where the rich use stolen money to launder it back into the economy.
“So many people have had their credit history destroyed, for good, just because they could not pay back 200 shillings on time. So, they should be regulated,” added Mr. Nabutola.
“We welcome regulation because it is a sign that the market is maturing. We are not against the regulations as some people might think,” said Mr. Kevin Mutiso from the Digital Lenders Association of Kenya.