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CRBs to resume listing Kenyans for defaulting mobile loans

Parliament's Finance Committee approves law seeking to regulate digital lenders

The National Assembly Committee on Finance and National Planning has cleared digital lenders to access the Credit Information Sharing (CIS) system in their report to Parliament following the 2021 Central Bank of Kenya (Amendment) Bill, 2021.

This means that digital lenders in the Kenyan market space will begin to access and list Kenyans with Credit Reference Bureaus (CRBs) under the proposed ‘digital lenders’ law.

“The Committee agreed to the proposal so that the digital lenders are allowed to disclose any positive or negative information of its customers to the licensed credit reference bureaus. The information so provided must be, only that which is necessary for the discharge of the functions of the digital lenders and the licensed credit reference bureaus,” said the Gladys Wanga led Committee.

DLAK in sittings with the Finance Committee had pushed for the return of digital lenders to the CIS system highlighting the role of CRBs in credit issuance.

“Many Kenyans lost the credit history reports that would enable them to obtain credit at lower risk-adjusted rates,” DLAK told the Committee.

Last week, the Committee approved the Central Bank of Kenya (Amendment) Bill 2021 that seeks to regulate digital lenders in the country.

The Committee also granted the regulator powers to price interest rates for digital loans.

”The Bill, therefore, seeks to give Central Bank of Kenya powers to regulate the digital lenders who are not regulated in other law e.g the Capital Markets Authority Act, the Banking Act and the Insurance Act. The CBK Act mandates the Bank to maintain a stable and sound market-based financial system,” reads the report.

Also Read:

  1. Gladys Wanga says there is need to protect consumers
  2. Parliament’s Finance Committee approves law seeking to regulate digital lenders
  3. CBK Governor Dr. Njoroge warns regulating digital lenders not enough

CBK will also control products that are put out by the digital lenders and also data from the borrower.

Digital Lenders Association of Kenya (DLAK) Chairman Kevin Mutiso appearing before the Committee on July 12 argued that “Digital Lending Industry is not a deposit-taking institution and the prudential requirements were not necessary,” something the CBK had sought to extend hand.

MPs agreed to the terms and shut down a plan to grant CBK mandate to set capital adequacy requirements for digital lenders.

CBK WILL have up to 30 days upon receipt of application documentation to either issue a license to a fintech or notify them of the decline in approval.

DLAK has welcomed the looming regulation of the sector, saying it will help lower the cost of credit and deal with rogue lenders.

The value of loans disbursed monthly halved to just Ksh.2 billion on the backdrop of the freeze, according to DLAK.

In April last year, CBK barred unregulated digital mobile lenders from forwarding the names of loan defaulters to CRBs and stopped the blacklisting of borrowers owing less than Ksh.1,000.

Delinking unregulated digital mobile lenders from CRBs was as a result of the public outcry over widespread misuse of the CIS mechanism.

About 624 digital lenders and credit-only providers were locked out from sharing information on loan payments and defaults.

The lifting of the ban is likely to see the number of Kenyans listed with CRBs spike on the back of elevated loan defaults covering the pandemic period.

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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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