Ten digital lenders have been licensed to operate in the country after complying with the new laws, the Central Bank of Kenya (CBK) has said.
Some 278 digital lenders who have applied for new licences but have not yet completed the process have been allowed to continue operating pending a review of their applications.
However, CBK ordered all unregulated digital lenders who did not apply for the licences to cease operations. It said it has received 288 licence applications since March this year. The approved digital credit providers (DCPs) include Ceres Tech Limited, Getcash Capital Limited, Glando Africa Limited (Trading as Flash Credit Africa), Jijenge Credit Limited, and Kweli Smart Solutions Limited.
Others are Mwanzo Credit Limited, MyWagepay Limited, Rewot Ciro Limited, Sevi Innovation Limited, and Sokhela Limited.
“Other applicants are at different stages in the process, largely awaiting the submission of requisite documentation. We urge these applicants to submit the pending documentation expeditiously to enable the completion of the review of applications,” CBK said. The bank has ordered all unregulated digital lenders, who didn’t apply for licences to cease operations.
This means only 288 digital lenders in the country are allowed to continue offering their loan services to borrowers. The Central Bank of Kenya (Amendment) Act, 2021 placed the DCPs under the purview of CBK to protect borrowers from predatory lending practices. This year, the bank gazetted the Digital Credit Providers Regulations to guide the licensing and regulation of the digital lenders.
The regulations gave unregulated digital lenders a six-month window, expiring this month, to acquire the licenses.
In the new regulations, the CBK requires the lenders to give the names and addresses of their shareholders as well as the terms and conditions of their loans. This seeks to eliminate the arbitrary adjustment of loan terms by the lenders.
It also requires the lenders to provide the pricing model and parameters of their loans to curb the exploitative interest rates charged by the lenders on their loan products, oftentimes several times above the existing market rates.
In a boost to borrowers, the regulations mandate the lenders to seek the consent of the borrower before they forward borrower information to be listed on credit reference bureaus (CRBs) for defaulting.
Millions of Kenyans are listed on the three major licensed CRBs—TransUnion, Metropol, and CreditInfo—for defaulting on payment for amounts as little as Sh200.
Borrowers are required to clear outstanding loans and pay Sh2,200 for CBR clearance before getting a clean bill of health to borrow. Digital lenders will now have to notify customers at least a month earlier before listing them as defaulters.
They will also be required to inform defaulters that they have been blacklisted to avert the current situation where they only realise they have been negatively listed when they seek a new loan.
Borrowers have also been handed a lifeline with the regulations limiting digital lenders from listing defaulters on low-value loans of less than Sh1,000 on CRBs.
President William Ruto has committed to drive change in the credit referencing framework, arguing that it has led to denial of credit to thousands of borrowers.
“We shall take measures to drive down the cost of credit. Our starting point is to shift the credit reference bureau framework from its current practice of arbitrary, punitive, all or nothing blacklisting of borrowers that denies borrowers credit,” Dr Ruto said during his inauguration last week.
