Digital Lenders unveil emergency measures to shield borrowers

Written By: Claire Wanja
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The emergence and growth of digital lenders has accelerated this development by complementing the role of commercial banks.
DLAK says the pricing of loans in digital micro-lending is structured in such a way that lenders can only recover all costs only after the 5th loan to the same customer.

The Digital Lenders Association of Kenya (DLAK) is advising their members to update their scoring models and the method of calculating creditworthiness to include the economic and social impact of COVID-19 pandemic.

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The members have also been asked to adjust the offers by considering the need to ensure the liquidity of households and microbusiness entrepreneur suffering temporary, negative effects of the epidemic, such as payment holdup or delayed salary.

This is part of part recommendations to address impending adverse economic effects of the COVID-19 pandemic to millions of customers with digital loans after consultative discussions in Nairobi.

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They say the mechanisms should be instituted within the next 14 days.

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The association also gave recommendation measures aimed at protecting borrowers against direct effects by health or economic consequences of the Coronavirus.

They include lenders to take every measure necessary to facilitate the repayment process by providing their customers with debt collection procedures as smooth and as friction-less as possible, supported by a variety of customized tools including loan extensions and/or repayment plans and schedules.

Lenders to enable the applications, justifications and documentation collection in an electronically and formalized way and to reply without delay, considering the applicants’ situations and current and foreseeable economic circumstances.

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And that while examining the applications, the loan institutions will be guided by the special circumstances and ethical principles of responsible lending.

The measures they say should take effect within the next seven days.

DLAK authorities, associated lenders and supporting members have expressed their readiness and reaffirmed their commitment to cooperate in shaping and implementing further systemic changes aimed at ensuring continuity of the financial industry in Kenya and minimizing the harmful effects of the epidemic on recipients of financial services.

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“As we continue to monitor implementation of these measures and the evolving nature of the Covid-19, we are calling for solidarity in counteracting the adverse effects of the epidemic. We appreciate that the global pandemic is increasingly worrisome, and our thoughts are very much with the health and well-being of our colleagues, clients and their families as valued members of our extended community.” Said a statement.

Adding that; “We assure you that we have the best practice business continuity processes in place, and we remain open and fully available to our clients and colleagues during this time.”

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