Mobile lenders proposal to block serial defaulters

[dropcap]K[/dropcap]enyans indebted to more than one mobile lending application will no longer continue to access loans from multiple lenders if a proposal by the newly created Digital Lenders Association of Kenya (DLAK) sails through.

The 12 member association is lobbying the Credit Reference Bureau (CRB) to establish a real time mechanism which will enable its members to acquire a borrower’s credit history in real time with the view of locking out borrowers with poor credit scores.

DLAK’s proposal means that any of the 12 members will be able to access a borrower’s credit history and decide whether to advance a loan to them or not in as little as ten minutes.

Speaking to Business Today after the association’s code of conduct launch on Thursday at a Nairobi Hotel, DLAK Chairperson and Zenka Finance CEO Robert Masinde said that the proposal is also aimed at ensuring that defaulting Kenyans don’t find themselves in a debt trap.

“As it stands there is no way for one digital lender for instance Zenka Finance to know the credit history of a borrower from another lender like Tala which is what we are trying to change for the benefit of all stakeholders,” said Masinde.

The chairman also said that CRB is currently adjusting its systems to the digital transformation in the financial services sector in the wake of the disruption brought about by fintech in the last five years.

“When we (digital lenders) came into the market CRB was in anologue mode, they were receiving requests from banks in writing. Times have changed and time is money, the faster the better but I am happy that CRB is moving to adapt to the changes,” said Masinde.

{Read: Mobile lending firms on the spot over predatory business models}

DLAK’s code of conduct launch comes in the wake of serious concerns by Kenyans and stakeholders that the mobile lending sector is not regulated and that some players were abusing the lacuna to exploit Kenyans.

In March, Central Bank of Kenya (CBK) governor Dr Njoroge called for the regulation of the sector lamenting that some players were operating like ‘shylocks’.

“There has to be a law in place to regulate these apps but how or who regulates them is anyone’s guess,” Njoroge said during a press briefing at the CBK.

Some of the lending apps have been accused of using unethical methods to recover funds from defaulters including calling everyone in the defaulter’s phonebook demanding the receivers of the call to ask the defaulter to pay back the loan lest they shall face unspecified action.

However according to DLAK’s code of conduct, that is illegal and any of its members who resort to such unconventional methods will face disciplinary action.

The members who all signed the code of conduct also pledged to protect their customers data, respect their rights and collect debts with dignity.

{See also: Digital lenders should self-regulate before Big Brother moves in}

DLAK consists of 12 members including Tala, Alternative Circle, Stawika Capital, Zenka Finance, MyCredit, Okolea, LPesa, Kopacent, Sotiwa, Mobile Financial Solutions (MFS), Kuwazo Capital and Finance Plan Ltd.

However there are 45 mobile lenders operating in the country which leaves 33 lenders unregulated but DLAK vice chairperson Rose Muturi says that the association has already received applications for membership and DLAK is currently vetting the applicants for suitability.