Central Bank of Kenya Governor Dr. Patrick Njoroge during a past event. CBK has published new regulations to tighten payment service providers' cyber security.

Central Bank of Kenya (CBK) Governor Dr Patrick Njoroge was on Wednesday put on the spot over failure to regulate mobile lenders who have been accused of lending to Kenyans at exorbitant interest rates, failing to protect consumer data and arbitrarily violating financial regulations due to lack of a legally recognised body to check the fintech players.

Appearing before the Senate Committee on ICT on Wednesday, Dr Njoroge said that CBK has found it complex to regulate the mobile lenders since their business models require involvement of other regulators such as the Communications Authority of Kenya (CA) since they lend via mobile phones and are not deposit taking institutions.

He however said that CBK and CA are in the process of establishing a regulatory framework that will instill sanity in the mobile lending space.

“In effect we are playing with matches, we are playing with matches at a petrol station and the danger there is significant. We are in touch with other regulators to establish a framework that will work for all parties,” said Dr Njoroge.

Narok Senator Ledama Ole Kina tasked Dr Njoroge with explaining why the monetary regulator was yet to craft a policy to ensure that the mobile lenders do not violate financial laws.

“The amount of interest that they are charging violates the law capping interest rates. They are also violating the law by charging roll over fees when Kenyans default on micro loans. There is also the issue of customer data being not protected, Why has this regulation gap been allowed to exist?” posed Senator Ledama.

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{Read: Digital advertising in Kenya to hit Sh117 trillion}

Speaking to journalists after the grilling session, the Senator also said that banks have also exploited the regulation gap and established their own lending applications which ought to be separated from the core businesses.

“If I send money from my bank account to another person who I don’t plan on sending to, there is no way for me to recover my money because there is no direct link between the bank, the telco and the other person,” said the Senator.

This comes one week after a section of mobile lenders under the Digital Lenders Association of Kenya (DLAK) banner launched a code of conduct with the view of self regulating and distancing themselves from other lenders who employ unethical practices in their business operations.

{See also: Digital credit goes from experiment to economic mainstay}

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.

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Samuel Gitonga is a senior reporter at BUSINESS TODAY. Email: [email protected]

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