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Mobile lenders ready for CBK regulations

Mobile lenders ready for CBK regulations

Digital Lenders Association of Kenya (DLAK) has welcomed the looming regulation of the sector, saying it will help lower the cost of credit and deal with rogue lenders.

According to DLAK, they gave out about four million loans last year alone.

CBK is expected to license the mobile lenders after Parliament last week cleared a Bill that seeks to regulate mobile loan rates and treatment of defaulted credit to protect borrowers from predatory lending.

“Regulation is a sign of maturity of a market. It means we now have understood what are the limits of our products.” Said Ivan Mbowa, Managing Director, Tala.

CBK currently regulates banks and micro-lenders but the proposed changes will now grant it supervisory and licensing powers to oversee hundreds of digital lenders operating in the country.

“The proposed amendment seeks to achieve the following objectives, prohibit any person, institution or firm from lending money to Kenyans unless licensed by the Central Bank of Kenya,” says a notice on the bill sponsored by nominated Member of Parliament Gideon Keter.

Tens of unregulated microlenders have invested in Kenya’s credit market in response to the growth in demand for quick loans by Kenyans.

Their proliferation has saddled borrowers with high interest rates, which rise up to 520 percent when annualized.

This, has led to mounting defaults and an ever ballooning number of defaulters who have been adversely listed with Credit Reference Bureaus (CRBs).

Market leader M-Shwari, Kenya’s first mobile-based savings and loans product introduced by Safaricom and Commercial Bank of Africa, charges a “facilitation fee” of 7.5 percent on credit regardless of its duration, pushing its annualised loan rate to 395 percent.

Tala and Branch, other top players in the mobile digital lending market, offer annualised interest rates of 152.4 percent and 132 percent respectively.

The push to control the activities of digital lenders comes more than a year after Kenya removed the legal cap on commercial lending rates.

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Lawrence Baraza is a prolific writer with competencies in Digital Media, Print, and Broadcast. Baraza is also a Communication Practitioner currently spearheading Digital content on Metropol TV's Digital Desk.

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