Tens of digital lenders in Kenya could be out of the market in six months after the Central Bank of Kenya (CBK) gazetted new rules. According to the Digital Credit Providers regulations, 2022, the lenders will have to get approval from the CBK for their operations. Also, they will have to seek approval from CBK on their loan rates unlike now.
“The Regulations are now operational, all previously unregulated DCPs are required to apply to CBK for a license within six months of the publication of the Regulations, i.e., by September 17, 2022, or cease operations,” CBK said on Monday.
The digital lenders will not be at liberty to share information of loan defaulters with third parties, a tool they have used to shame and coerce defaulters into paying the loans.
“The regulations provide for inter alia the licensing, governance, and lending practices of DCPs. They also provide for consumer protection, credit information sharing, and outline the Anti-Money Laundering and Combating the Financing of Terrorįsm (AML/CFT) obligations of DCPs,” added CBK.
CBK says a DCP shall not invite or collect deposits in any form, including the taking of cash collateral as security for loans, in the course of carrying out digital credit business.
The lender will also not be allowed to submit negative credit information of a customer or any other person to a Credit Reference Bureau where the outstanding amount relating to the credit information does not exceed Ksh1,000.
Also, the lenders will no longer be allowed to access the customer’s phone book or contacts list and other phone records.
The number of borrowers getting loans from the unregulated lenders grew to more than two million two years ago from an estimated 200,000 in 2016.
All digital credit providers will also be required to reveal the sources of funds invested or proposed to be invested in the business and demonstrate that the funds are not proceeds of crįme.