The Central Bank of Kenya (CBK) has commenced the process of amending a law to regulate rogue and exploitative digital mobile lending.
CBK Governor Patrick Njoroge said on Thursday that they had proposed changes to the Central Bank Act to enable it to control the digital lenders who have been faulted for exploiting their customers.
“We have noted concerns on digital lenders on borrower indebtedness, financial integrity, and consumer protection. Their rates are crazy, and the way they deal with their customers is a concern,” said Njoroge.
He was answering to the questions by the Senate ad-hoc committee on Coronavirus pandemic on the measures taken by the regulator to cushion Kenyans during the crisis.
The move comes after the Governor blocked the lenders from listing their loan defaulters on Credit Reference Bureau (CRB).
CBK said that the move was informed by a public outcry about the widespread abuse of the credit information-sharing mechanism.
Njoroge reiterated that they were tightening amendments to limit emergency issues such as money laundering concerns by the digital lenders.
“We have over 100 digital lenders, and we don’t know their money sources. Some of the lenders could be laundering money, and that is why we need to regulate them,” he added.
The intended changes would fix lending rates at a certain percentage and offer standard guidelines on how to handle borrowers to address exploitation concerns.
Njoroge noted that they had been working on the amendments, and they would regulate the entities rightly. He said they would not be regulated like big banks, but the customers would have to be treated with dignity.
The CBK Governor stated that the Central Bank Amendment Bill (2019) was seeking to enable the Central Bank of Kenya to regulate the credit-only entities beginning with digital mobile lenders, and later extend to all unregulated credit providers in Kenya.
Njoroge told the Committee led by Senator Johnson Sakaja that they had taken raft measures to shield the commercial banks and cushion borrowers by lowering the Central Bank rate down to 7 percent from 7.25 to signal other banks to reduce their interest rates on loans.
Banks have further been directed to offer relief to personal loan borrowers based on circumstances resulting from the Covid-19 pandemic.