A law that allows for the licensing and supervising of digital lenders came into effect on December 23. This is following the signing of the Central Bank of Kenya (Amendment) Act, 2021 into law by President Uhuru Kenyatta on December 7.
The Central Bank of Kenya in a statement released on Thursday 23rd December said, “This is a significant milestone” while announcing the draft Digital Credit Providers Regulations. 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.”
The CBK is currently receiving public comments on the draft Regulations which are expected to be published by March 23, 2022. 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. These are the CBK, Communications Authority and Office of the Data Protection Commissioner to work closely to ensure that borrowers’ data is protected.
“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,” further read the statement by CBK.