This archive report was first published on 2 July 2019.
Published on July 2, 2019, Kenya is struggling to regulate digital lenders that have left millions of poor Kenyans trapped in debt.
The Central Bank of Kenya Governor, Dr. Patrick Njoroge, has repeatedly stated that fintech firms cannot be allowed to continue wreaking havoc in the financial services sector under the guise of filling a vacuum created by interest rate capping and the drive to universal financial inclusion.
However, the country is finding it difficult to regulate the mobile-based fintech firms, as they cut across the financial services sector regulated by the CBK and the telecoms sector regulated by the Communications Authority.
The fact that digital lenders are non-deposit-taking has left the CBK relying only on the guidelines in the Banking Charter.
The Competition Authority of Kenya, which is mandated to protect consumers from unfair and misleading market conduct, is also at a loss over how to rein in the lenders.
The industry estimates there are seven million borrowers in Kenya procuring loans from more than 50 digital lenders, with the average loan size being $40 and interest rates up to 150 per cent.
Dr. Njoroge says that as regulator of commercial banks and deposit-taking microfinance institutions, the CBK will ensure that “merchants do not take advantage of Kenyans who are seeking quick loans.”
But the lack of regulations on non-deposit-taking institutions has made it impossible for the CBK to protect borrowers, as rogue lenders perpetrate data violation, fraud, lack of transparency and full disclosures, negative credit reference bureau listings and unethical practices in debt collection.
