CBK and Digital Lenders: Digital lenders to Register in New CBK Rules
[ Update 28.03.2021]
Digital lenders to get new licences. Laws to regulate these lenders to come into effect in 2022!
The CBK Amendment act of 2021 allowing CBK to license and supervise digital lenders came into effect in Dec 2021. Some of the reasons for the need for the said license is to curb predatory lenders who call client contacts and share information with third parties.
Seemingly these rogue lenders have taken advantage and breached the confidentiality of borrowers and employ name shame tactics to coerce borrowers to pay their mobile loans.
The list of digital lenders in Kenya might grow short with proper lenders under DLAK like Branch, Zenka and Tala being among the few to make the cut
For the past 5 years, demand for quick credit has been attractive and Kenyans usually rush to borrow without reading the terms and conditions. thereby resulting in displeasure and defaulting on said credit loans when due.
What Does This Mean For The Lender?
Digital lenders have 6 months to register. This comes as a move to bar them from sharing borrowers’ information with third parties. Meaning going forward lenders need CBK approval on interest on their loans.
The digital Credit Providers regulation was gazetted in 2022. Digital lenders are to apply for these said licences before September from the banking regulator, CBK.
Generally, because Mobile money lending is high risk with no tangible collateral, certified lenders need access to transaction history and other data analytics to manage credit risk.
For the first time, digital lenders are going to be under watch by the CBK! Therefore predatory lenders that revert to debt shaming tactics are at risk should they not, get the license from the banking regulator.
Lenders now are in the same category as banks in regards to financial rules and regulations.
In a bid to ensure fairness in credit pricing, these regulations aim to ease the strain on borrowers suffering heavy interest rates. furthermore, ensure proper lending standards are maintained.
Simply put, the new regulations by CBK on digital lenders are:
- set to caution against high-interest rates,
- unethical debt collection practices
- and, misuse of personal data by predator lenders.