Mobile lenders, also known as digital lenders will not be subjected to minimum capital and liquidity requirements as the Central Bank of Kenya (CBK) is handed powers to regulate the controversial creditors.
On Thursday evening, the National Assembly passed the 2021 Central Bank of Kenya (Amendment) Bill whose provisions will now await the assent of President Uhuru Kenyatta before becoming law.
While the CBK will not enforce any capital or liquidity rules to the lenders, the reserve bank has now been handed substantive powers to take the unregulated industry which Governor Dr. Patrick Njoroge has previously likened to the Wild Wild West.
Other last minute amendments to the bill will require digital lenders to provide key information which applying for licensing from the CBK including the certificate of incorporation under the Companies Act, memorandum and articles of association and a statement of compliance with provisions of the Consumer Protection Act.
Players in the digital lending space will have six months to apply for licensing from the date the CBK publishes requisite regulations.
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By passing the amendment bill, Parliament has allowed the CBK to proverbially bell the cat with the banking sector regulator eyeing order in an industry which has been accused of a variety of misdeeds including pushing exorbitant interest rates on borrowers and using crude and underhand tactics to recover monies from debtors.
CBK Governor Patrick Njoroge has remained vocal over the observed misdeeds as he finds the digital lenders to be a pain to not just Kenyans but the economy.
“One is minding their own business only to get a call from deep from their rural area on why they have not paid their loan. Imagine if we called your boss to say you owe us serious money only for the debt to turn out to be Ksh.2000. What would happen?” Dr. Njoroge posed in a previous news conference.
“These (digital lenders) are little fleas. Their output in terms of credit is less than 0.14 percent, that’s less than the smallest bank around but in terms of noise and pain to Kenyans they are at 90 percent.”
The CBK will be allowed to set parameters for interest rates charged by the digital lenders while the reserve bank is at liberty to revoke licenses to players for breaching conditions of the Data Protection or the Consumer Protection Act.
Meanwhile, digital lenders will be allowed to list creditors with Credit Reference Bureaus (CRBs) marking their return to the credit information sharing (CIS) system after their ouster last year by CBK.
With input from Citizen Digital
