President Uhuru Kenyatta has signed into law the Central Bank of Kenya (CBK) Amendment Bill 2021, which will allow the regulation of digital lenders. The bill gives all digital lenders a six months ultimatum, up to June 7th 2022, to be registered by the Central Bank.
“The amended Central Bank Act, 2021, gives the Central Bank of Kenya authority to license digital lenders in the country as well as ensure the existence of fair and non-discriminatory practices in the credit market,” read part of the statement from the President’s office.
The Amendment Bill had seven clauses that sought to amend the CBK Act to provide for licensing of digital credit service providers who are not regulated under any other law.
“As such the Central Bank of Kenya will be obligated to ensure that there is a fair and non-discriminatory marketplace for access to credit,” Gladys Wanga, Chairperson, Departmental Committee on Finance and National Planning said in relations to the Bill
Once registered, the CBK already said it will not cap interest rates charged by the digital lenders. However, they will be expected to price their loans appropriately and treat borrowers well.
While considering the bill, Parliament noted the need for three regulators; CBK, Communications Authority and Office of the Data Protection Commissioner to work closely to ensure that borrowers’ data is protected.
Consequently, the Competition Authority of Kenya (CAK) requires digital lenders to reveal interest rates, late payment and rollover fees for their loans before disbursing credit to customers.
According to a CA report, 77% of mobile loan borrowers have been forced to pay penalties and were charged to roll over their debts. Additional data from the CBK shows that borrowers borrowing digital loans from unregulated lenders surged from 200,000 in 2016 to more than two million in 2019.