Central Bank of Kenya’s ongoing vetting of digital lenders is commendable and in the interest of the public. The banking regulator has so far cleared 10 firms and issued them with permits to operate in the country after they complied with the new laws aimed at restoring sanity in the personal loans market.
The digital credit providers (DCPs) approved so far are Ceres Tech Limited, Getcash Capital Limited, Glando Africa Limited (Trading as Flash Credit Africa), Jijenge Credit Limited and Kweli Smart Solutions Limited. Applications for licences by 278 digital lenders are being evaluated, even though they have been allowed to continue operating in the meantime.
A recent proliferation of fintech firms has caused a debt crisis that has pushed many households to the brink. Some rogue firms had taken advantage of the recent economic downturn to make a kill through exaggerated interest charged on personal loans and buy now, pay later schemes. More disturbing, some of the fintechs hounded their customers with intrusive phone calls to their friends and family on default on payment.
This is unethical, and CBK deserves support as it implements the Digital Credit Providers Regulations (2021) that are targeted at reining in rogue lenders. For instance, under the new rules, mobile phone lenders will be required to disclose the total charges for their loans—including interest rates, late payments and roll-over fees—before disbursing credit to customers. They also bar digital lenders from intrusive debt pursuit strategies such as public shaming.
The vetting is critical and applicants should be patient, given the sensitivity of the financial markets. The Central Bank should be accorded ample time to vet digital lenders and ensure that the public is fully protected from exploitation.