On Tuesday 7th December, President Uhuru Kenyatta signed the Central Bank of Kenya (CBK) Amendment Bill 2021 into law. According to the government, “the amended Central Bank Act, 2021, gives the Central Bank of Kenya powers to licence digital lenders in the country as well as ensure the existence of fair and non-discriminatory practices in the credit market.”
Digital lenders have until 7th June 2022 (six months) to apply for a licence from the CBK (previously, digital lenders were only required to register with the CBK.) Digital credit is defined as a credit facility or arrangement where money is lent or borrowed through a digital channel. Digital channels include the internet, mobile devices, computer devices, applications, and any other digital systems prescribed by the CBK.
The CBK has been concerned about how digital lenders have extended credit to consumers, with some digital lenders charging exorbitant penalties, with interest rates of more than a 100%. According to a report commissioned by the Competition Authority of Kenya, 77% of mobile loan borrowers have been forced to pay penalties and were charged to roll over their debts.
Customer privacy was another challenge, as digital lenders often shared customer data with third parties. Lastly, in cases where customers defaulted on debt repayments, digital lenders sometimes resorted to incessant reminder calls or shame tactics (calling friends of families of customers who had defaulted.)
Most of Kenya’s digital lending takes place on mobile phones, with Safaricom’s M-Shwari being the most popular digital lending platform in Kenya. In 2019, over two million Kenyans made use of mobile lenders.
For more information about the Bill and its implications for digital lenders, please contact melissa.govender@accesspartnership.com
