This archive report was first published on 14 March 2020.
Kenya's digital lenders are taking steps to safeguard their businesses, particularly in the face of impending parliamentary scrutiny.
According to Kevin Mutiso, spokesperson for the Digital Lenders Association of Kenya (DLAK), the association's 23 members have implemented measures to reduce the risk of defaulters.
These measures include working with bodies like the Kenya Revenue Authority, National Registration Bureau, and Credit Reference Bureau to obtain valuable information about clients.
As a result, digital lenders will no longer lend to students and the unemployed, who are considered high-risk borrowers.
Mr. Mutiso cited Shika App, a digital lender he runs, as an example of this new policy. Shika App is no longer lending to individuals aged 25 and below, the majority of whom are college students.
The association has also launched a data exchange mechanism to prevent multiple lending, which increases the chances of default.
Under this initiative, if a person has borrowed, say Sh20,000 from Tala, they will be barred from taking another loan from any other digital lender before the previous loan is repaid in full.
DLAK has also launched a national campaign on financial literacy to educate the public on how digital lenders operate.
The campaign, known as Money March, aims to bring together providers and customers to discuss how to best leverage digital lending.
However, the move has been met with criticism from some lawmakers, who argue that digital lenders are operating outside the law.
On Wednesday, National Assembly Speaker Justin Muturi sanctioned an investigation into digital money lending, with a view to stopping unregulated lending.
The investigation follows a petition by Mathare MP Antony Oluoch, who wants the Committee of Finance to probe the alleged 'illegal and exploitative tendencies' of digital lenders.
Mr. Oluoch also wants the Central Bank of Kenya and the Communication Authority of Kenya to audit the operations of the lending platforms and regulate them.
He argues that digital borrowing has become a social menace responsible for suicides, divorce, family breakup, and increased listings of loan defaulters by the Credit Reference Bureau (CRB).
Some of the platforms that will be investigated include Tala, Mshwari, Fuliza, KCB M-Pesa, Branch, Shika App, iPesa, Berry, Okash, and Zenka.
Statistics from the Kenya National Bureau of Statistics (KNBS) show that there are currently more than 50 mobile and online credit providers in Kenya, with over 19 million Kenyans actively borrowing.
However, Mr. Mutiso insists that digital lenders are open to regulation and are willing to collaborate with the Central Bank of Kenya, Parliament, and other relevant bodies to ensure proper laws and regulations are put in place to guide the sub-sector.
