All digital lenders within the Kenyan market space will start being regulated effective December 23, 2021, the Central Bank of Kenya (CBK) has said.
This is through the Central Bank of Kenya (Amendment) Act, 2021, which seeks to regulate digital lenders providers after it was signed into law by President Uhuru Kenyatta earlier this month.
Henceforth, CBK will have full powers to license and oversee the previously unregulated digital credit providers who have been accused of charging very high-interest rates and harassment of defaulters.
“With the recent advances in technology and ongoing innovations, lending through digital channels, particularly mobile phones, has grown significantly in Kenya. However, concerns have been raised by the public about the predatory practices of the unregulated digital credit providers, and in particular, their high cost, unethical debt collection practices, and the abuse of personal information.” CBK said in a statement sent to newsrooms.
The CBK is currently receiving public comments on the draft Regulations which are expected to be published by March 23, 2022.
“The Regulations provide for inter alia the licensing, governance, and credit operations of Digital Credit Providers (DCPs). They further provide for consumer protection, credit information sharing, and elaborate on the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) obligations of DCPs.” says CBK.
The new law explicitly grants Central Bank the powers to determine pricing parameters. This will ensure that CBK does not necessarily set the lending rate but rather provide parameters within which digital credit providers shall set their cost of credit.
The digital lenders who are not regulated by CBK and are operating within the Kenyan marketplace have until June 2022 next year to comply with registration requirements.
The Central Bank will also 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.