Parliament Committee Finalize Law Seeking To Tame Digital Lenders

The National Assembly Finance and Planning Committee has given new recommendations to the Central Bank of Kenya (CBK) (Amendment) Bill 2021 and added a clause that gives the CBK powers to price interest rates for digital loans.

The highlights of the proposed regulations include curbing steep digital lending rates and rogue actors who use debt shaming as a way of collecting payments.

If the bill is approved, CBK will also control products that are put out by the digital lenders and also data from the borrower.

The key aim of the government-backed Central Bank of Kenya (Amendment) Bill, 2021, which seeks to empower the banking regulator to supervise digital lenders for the first time, is to curb the steep digital lending rates that have plunged many borrowers into a debt trap as well as predatory lending.

The committee proposed that the CBK be given powers to regulate digital lenders who are not regulated by any other agency or laws such as the Capital Markets Authority (CMA) or laws such as the Banking and Insurance Acts.

The proposed law will help in curbing rogue actors in the sector who have tarnished its reputation according to the Digital Lenders Association of Kenya (DLAK).

Gladys Wanga-led’s committee rejected proposals to grant the CBK authority to set capital sufficiency requirements for digital lenders.

“This is good news for the sector. This will see rouge actors tamed and more importantly the CBK will provide guidelines that will see proper pricing in the sector,” said Kevin Mutiso, Chairman, DLAK.

Failure to comply with the new regulations if passed will lead to action being taken against the lenders

The Bill was initially silent on the lending rates, only stating that the digital lenders were to play under the same rules as commercial banks that seek the CBK’s nod for new products and pricing that includes loan charges.

The report of the committee is now before Parliament for debate and approval ahead of it becoming law

“Rouge actors will have a very hard time operating. If they breach the regulation this will see the company and its directors have taken to court, fined and also some might lose their positions,” added Mutiso

According to Data by Metropol Credit Reference Bureau (CRB) 14,035,718 Kenyans had been blacklisted by January 2021.