Kericho woman rep Kemei moves motion to regulate shylocks, protect borrowers
A shylock shop in Mombasa's Kisauni area on April 17, 2021. Unregulated money lenders will be regulated for the first time in 39 years if a proposal tabled in Parliament is passed.
Unregulated money lenders, commonly known as shylocks, will be regulated for the first time in 39 years if a proposal tabled in Parliament is passed.
Locked out of credit from regulated financial institutions such as banks and Saccos and hit by the rising cost of living and doing business, individuals and small businesses often turn to shylocks for quick loans.
But these shylocks, who prey on the desperation of most borrowers and operate outside any regulation, charge extortionate interest rates on their loans, which are usually short-term and often for a period of one month or less.
Most of these shylocks operate from stalls set up as ordinary shops and are not licensed to operate. Borrowers are required to provide collateral such as electronics, including televisions, mobile phones, laptops, microwaves, as well as car logbooks and land titles.
In the absence of formal lending institutions, the British colonial government enacted the Money Lenders Act in 1933 to regulate the practice of individuals lending money and charging interest. However, this law was repealed by the government of President Daniel arap Moi in 1984.
Kericho Woman Rep Beatrice Kemei has now moved a motion in Parliament seeking to regulate shylocks to protect borrowers in line with the Consumer Protection Act of 2012.
Ms Kemei noted that shylocks "provide loans outside the scope of formal financial institutions" and that "with the repeal of the Money Lenders Act in 1984, unscrupulous businessmen have exploited the loopholes to the detriment of the general public".
She said shylocks use predatory practices such as high interest rates, hidden fees, unclear terms and conditions, and aggressive loan recovery methods.
"The impact of these unregulated operations goes beyond the financial implications but is also social and emotional with reports of depression, family breakdowns and even cases of suicide by borrowers due to excessive penalties and harsh collection methods,” the MP said.
