Among other things, digital lenders have been accused of exploitative lending, debt shaming, money laundering and illegal mining of private customer data. [Photo/ Cathryn Virginia | NBC News]
Among other things, digital lenders have been accused of exploitative lending, debt shaming, money laundering and illegal mining of private customer data. [Photo/ Cathryn Virginia | NBC News]

Central Bank of Kenya (CBK) Governor Patrick Njoroge has called for digital lenders to be allowed to resume reporting loan defaults to Credit Reference Bureaus (CRBs), after they were banned from doing so in April 2020.

The unregulated digital lenders were suspended from using the credit information sharing system amid a*********s of its misuse by lenders who operate various loan apps, forming part of a long list of unethical practices the digital lenders have been accused of.

However, with the state-backed Central Bank of Kenya (CBK) Amendment Bill, 2021 looking to bring digital lenders under the ambit of the apex bank as a regulator, Njoroge wants the lenders brought back into the credit-information sharing fold.

“The Central Bank Amendment Bill 2021 should empower digital lenders to share credit information,” he told the National Assembly’s Finance and Planning Committee.

The suspension of digital lenders from CRB reporting had seen a massive decline in the volumes of loans they issued. According to the industry lobby – the Digital Lenders Association of Kenya (DLAK) – the value of loans issued each month fell by over 50% to Ksh2 billion.

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If allowed to resume reporting to CRBs, it is expected that digital lenders will be able to issue more loans once again.

Many of them, however, could yet fail to comply with the stringent new rules proposed to rein in the sector in the CBK Amendment Bill, 2021.

In one of the biggest changes proposed in the bill, meant to curb the high interest rates offered by the apps – CBK will be required to determine minimum liquidity and capital adequacy requirements for digital credit providers, similar to regulations for operating a bank.

Among the issues the bill hopes to address are consumer complaints on loan apps’ exploitative lending, debt shaming, money laundering and i*****l mining of private customer data.

“The principal object of this bill is to amend the Central Bank of Kenya Act in order to ensure the Central Bank of Kenya regulates the conduct of providers of digital financial products and services and financial products and services.

“The current position is that there is no legal framework governing digital borrowing platforms and other financial products and services. As such, the Central Bank of Kenya will have an obligation of ensuring that there is a fair and non-discriminatory marketplace for access to credit,” the bill read in part.

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