CBK gives mobile lenders until September to apply for new licenses

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CBK gives mobile lenders until September to apply for new licenses


Patrick Njoroge, Governor of the Central Bank of Kenya. PICTURES | NJAU SALATON | NMG

Summary

  • CBK Governor Patrick Njoroge said on Tuesday that new regulations under a new law are expected to be released this month as the noose tightens on previously unregulated digital lenders.
  • President Uhuru Kenyatta last December approved an amendment to the law allowing the central bank to regulate digital lenders, a move that gave the bank the power to curb lenders that violate consumer privacy.

Digital lenders have up to six months to acquire new licenses from the Central Bank of Kenya (CBK) before they are allowed to operate in the country under the new regulations that have been formulated.

CBK Governor Patrick Njoroge said on Tuesday that new regulations under a new law are expected to be released this month as the noose tightens on previously unregulated digital lenders.

President Uhuru Kenyatta last December approved an amendment to the law allowing the central bank to regulate digital lenders, a move that gave the bank the power to curb lenders that violate consumer privacy.

“Regulations governing digital credit providers will be released later this month to pave the way for CBK to license and oversee DCPs,” Dr Njoroge said.

“All previously unregulated DCPs will have to apply for a license from CBK by September 2022 or cease operations.”

The Digital Credit Providers Regulations 2021 gave the CBK the power to revoke the licenses of companies that send delinquent debtor information to third parties as part of name-and-shame tactics aimed at recovering the money. .

Under the new legislation, lenders are required to apply for licenses from the CBK, whereas previously they only had to register to establish themselves in the East African country.

Digital businesses have flooded the local market in recent years, attracted by the demand for fast credit without collateral. Borrowers get loans in minutes via their mobile phone, making digital loans a quick fix for everyday bills.

In addition to social pressure, digital lenders rely on data analytics and loan repayment history, among other tools, to manage credit risk.

“The amended Central Bank Act 2021 empowers the Central Bank of Kenya to license digital lenders in the country and ensure that there are fair and non-discriminatory practices in the credit market,” said declared State House last year.

The lack of regulation meant that customer privacy was never guaranteed, as these digital lenders arbitrarily shared user data with third parties.

In addition, customers who defaulted on their loans faced constant reminders from debt collectors, who also used shameful tactics like calling friends and family to compel defaulters to pay.

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