Kenya to Regulate Loan Rates of Digital Lenders with Proposed Amendment

• Kenya’s Central Bank (Cbk) is getting set to control the credit rates for digital lenders operating in the country. That is in line with some of the proposed amendment bill for the Central Bank of Kenya for 2020.
• The key object, according to a notice on the bill, is to amend the Central Bank of Kenya Act to regulate the conduct of digital financial products and services.
• The move to check digital micro-lenders’ activities come as a result of a series of complaints about their predatory practices.

The Central Bank of Kenya (CBK) is getting set to control the credit rates for digital lenders operating in the country. That is in line with some of the proposed amendment bill for the Central Bank of Kenya for 2020.

When passed into law, the CBK will regulate the monthly interest rates that digital mobile lenders can charge, such as increases or other loan charges. It will also set a limit on non-performing loans no more than twice as high as the defaulted credit.

In other words, the apex bank would have to approve price increases or the introduction of any new product for digital micro-lenders operating in Kenya. These platforms, like other commercial banks, will require regulatory approval before making any significant changes.

The key object, according to a notice on the bill, is to amend the Central Bank of Kenya Act to regulate the conduct of digital lenders, financial products and services. The role of the banking regulator then lies in ensuring equal access to credit.

READ ALSO: Seychelles Receives $10M Loan From AfDB To Re-Open Economy

Generally speaking, these moves to check digital micro-lenders’ activities come as a result of a series of complaints about their predatory practices. They include loan interest rates as high as 520 per cent per year, harassment of friends and loved ones, and dubious information on loan terms.

The issue of predatory lending is not unique to Kenya. A number of such fraudulent lenders appeared on the Google Play Store last year, and the tech giant had to enforce new guidelines to curb the tide of abusive lending.

Despite this, there are still several of those apps on the Google Play Store, and little has been done to stop the tide. For instance, the new phenomenon of predatory lending in Nigeria is a trend that is yet to be notice by regulations in the country.

Borrowers are seeking loan relief due to the harsh economic effects of the COVID-19 pandemic and loan companies are likely to experience a lot of defaults. Nevertheless, putting an end to financial activities which could bring people into debt is essential.