The need to regulate activities of digital lenders operating in Kenya has come to the fore with calls by both operators and subscribers for a sort of formalization of the operations to create a transparent and accountable operating environment. This came even as the digital lenders have agreed that they are in support of plans by the country’s financial regulatory agencies, especially the central bank to regulate their industry amid concerns they are placing borrowers under increasing debt stress. Speaking on the development, the Digital Lenders Association said that regulations should be based on the digital lenders’ code of conduct. This according to them will promote transparency, best practices for debt collection, market-based pricing with no hidden fees.
Kenya has a relatively more developed digital lending ecosystem due mainly because the country embraced it earlier than others. It is among the first countries where digital lending, mostly using a mobile phone, went mainstream. The pioneering lenders came under the spotlight following complaints of exorbitant interest rates and bad collection methods. With dozens of apps offering short-term advances similar to payday loans, people who once borrowed mainly from family and friends are now being bombarded with advertisements for quick money and calls from debt collectors.
Read also:Kenya Bans Digital Money Lenders, Extends Loan Repayment Period For Businesses
And because it is an unregulated system, there are no caps on interest rates, except those backed by banks that are supervised by the Central Bank of Kenya. In April, the central bank, which wants all the lenders properly supervised, blocked unregulated loan companies from some credit-reference services after public complaints that some firms were misusing information.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry