Why It Is Unwise To Restrict Digital Lenders In Kenya

There is a heated debate that has been going on across social media platforms in the past week on whether to regulate or restrict digital lenders in Kenya. The opponents and proponents of the matter seem to be torn in between the two semantics.

This Friday (28/5/2021) marks the deadline that the National Assembly had issued to Kenyans to present their views on the proposed changes on the Central Bank of Kenya Act to include the regulation of digital lenders in Kenya. Not clear whether Kenyans have done so.

The Bill was re-introduced to the House by the Chairperson of the Departmental Committee on Finance and National Planning Gladys Wanga. Even among the legislators, there is a divided and heated opinion concerning the matter.

The Bill seeks to have the CBK regulate mobile lenders in Kenya who have been accused of operating without following the rules. Proponents of the Bill feel that digital lenders have taken advantage of “being free” to “frustrate Kenyans.”

“This legislation arises from the need to ensure fair and non-discriminatory marketplace for access to credit through a legal framework to regulate digital borrowing platforms,” said the National Assembly in a notice to the public. The Bill has already been presented and has gone through the First Reading in the National Assembly

Read More:

• Statement On Proposed Changes In The Central Bank of Kenya (Amendment) Bill, 2021
• We Not Against Regulation By CBK – Digital Lenders

Even as the debate on whether to regulate or restrict digital lenders in Kenya rages on, we should not forget that Kenya has been leading 20 other African countries as the giant in financial inclusion for the last 10 years.

We should not forget that the milestones in financial inclusion have been attributed to digital finance providers who have been responsible for lending to individuals and micro-businesses.

Financial inclusivity is essential as an open market can lead to some members of the society being excluded due to non-standardized practices. Digital financial providers understand that regulation is the way to get a win-win outcome.

Digital finance providers not only provide emergency cash to Kenyans but also financial education, a case of not just giving the customer fish but showing them how to fish too. Thanks to the evolution in technology, Kenya’s financial sector has taken a shift.

Read More:

• Digital Lenders Key For Financial Inclusion In Kenya
• Branch Mobile Loan App Goes Into Mainstream Banking, Buys Majority Stake In A Kenyan Bank

But why are Kenyans borrowing from digital lenders more than from commercial banks? First, nobody is forcing Kenyans to borrow from these digital lenders. Kenyans are borrowing from their own free will to meet their financial demand.

The truth is Kenyans love digital lenders because the lenders “trust” them more as compared to the mainstream lenders. With digital lenders, there is no security required. They do not ask for a logbook or a title deed from borrowers.

It is purely on trust. Some like Tala have been lending as much as 70,000 shillings to individuals without asking for any security. By the way, the only hope for digital lenders to get their money was by using the CRB. But the CBK took away this power from them.

There are at least 12 reasons why Kenyans borrow from digital lenders:

• Business
• Day-to-day needs
• Education
• Airtime
• Pay bills
• Personal/household goods
• Medical emergency
• To try it out
• To lend to others
• Repay other non-mobile loans
• Repay other mobile loans
• Betting

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