Owners of digital lenders face audits

Patrick Njoroge

Central Bank of Kenya Governor Patrick Njoroge displays new notes at his office in Nairobi on June 3, 2019. CBK has published new regulations for digital credit providers in the country

Photo credit: File | Nation Media Group

The government will conduct lifestyle audits for the owners and top officials of mobile lenders – including their debt status, criminal record and tax payment history – to curb risks of fraud and money laundering in the lucrative business.

New rules published by the Central Bank of Kenya (CBK) introduce special vetting of significant shareholders, directors, chief executive officers and senior managers to give the state full information on the lenders’ ownership.

The CBK said it would require a certificate of good conduct, tax compliance certificate and credit reference bureau report for each of the digital credit providers’ owners and senior officials as a precondition for licensing.

In addition, the apex bank requires the digital lenders to present anti-money laundering and combating financing of terrorism policies and procedures, and data protection policies and procedures.

CBK also changed a requirement that lenders should provide details on corporate bodies proposing to have a significant shareholding in them.

The regulator further wants lenders to provide “a description and evidence of sources of funds to be invested in the applicant,” terms and conditions of credit products and services a lender intends to provide.


The regulations provide for licencing and oversight of previously unregulated digital lenders.

CBK said the regulations seek to address concerns raised by the public relating to the predatory practices of the previously unregulated lenders, particular high costs, unethical debt collection practices and abuse of personal information.

The lenders will from September be required to disclose the total charges for their loans, including interest rates, late payment and roll-over fees, before disbursing credit to customers.

The requirement to disclose hidden charges is part of the conditions for fresh licensing of the digital lenders.

CBK will have powers to revoke or suspend the licences of digital lenders who do not disclose full information on loan facilities to borrowers in line with the consumer protection law.

Commercial banks

President Uhuru Kenyatta in December signed into law the Central Bank Act, 2021, bringing digital lenders under the watch of the banking regulator for the first time. The Act will see the lenders seek CBK’s approval in pricing their loans and products, subjecting them to the same rules as commercial banks.

The new law also grants the banking regulator powers to revoke the permits of digital lenders who breach the confidentiality of personal information while pursuing defaulting borrowers.

This aims to stop the practice where some lenders resort to “debt shaming” to recover loans. There have been reports of debt collectors pursuing borrowers by informing their friends, family or employers after obtaining contact details from borrowers’ phones.

The law requires the digital lenders to comply with the rules within six months of CBK publishing regulations to guide its implementation.


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