The anticipated Central Bank of Kenya (Amendment) Bill 2020 is expected to streamline the digital lending space which has recorded sharp rise in less than a decade.
As non-deposit taking institutions, digital lenders have continued to operate in the country without being subjected to laws commercial banks operate under a move that has exposed many consumers.
“These money lending apps are good they help people during hard times but they need to be controlled. They should have some control whereby the interest is regulated because some are shylocks with rates out of this world,” lamented Kennedy, a consumer in Mombasa.
Speaking to KBC Channel 1, Tala East Africa Managing Director Ivan Mbowa said proposals to have the regulator determine capital adequacy as well as the minimum liquidity requirements for digital credit providers will help weed out rogue digital lenders who have deployed unorthodox tactics to lend and recover loans from consumers.
“There will most probably be a drastically reduced number of players. Today we are over 300. In a post-regulated industry you will know the right number similar with banks and you will be able to go to CBK website and see who is licensed to actually participate in the business,” said Mbowa.
Should the bill become a law, digital lenders currently in operation will have to register with CBK within six months.
According to Digital Lenders Association of Kenya, the country’s digital lending market is estimated at Kshs. 30 billion and could grow to over a trillion within five years.
CBK has also been keen to ensure the fintechs do not engage in illicit money flows which could impact soundness of the financial system.
“Once you have enhanced scrutiny around who is behind fintechs it will address any anti-laundering laws that CBK perceives and it will lead to fewer players. I think depending on what the CBK puts up and saying what you have to prove, some will shy away but the vast majority will come clean,” said Mbowa.
The 2nd Global Alternative Finance Market Benchmarking Report by Cambridge Judge Business School indicates that the volume of digital lending rose 27% to hit $113 billion between 2018 and 2020.
Consumers across the country have further backed proposals to enforce data protection which has been prone to abuse by a section of lenders.
Hinga, a Mombasa resident who has faced harassment from lenders says the move will ensure accountability by lenders in case of breach.
“There are problems with data protection. Sometimes you find calls at odd hours telling you there is money you borrowed in some app you need to pay. The loan apps must assure people your data is safe because before you open an account you give them a lot of information some of which are private,” said Hinga.
According to Ivan, Tala has deployed artificial intelligence to assess a customer’s credit worthiness using at least 5000 data points without any human interaction involved.
Nonetheless, borrowers have called for simplification of terms and conditions which many have not been keen to read when taking loans.
“They do not issue loans without asking for your details. They ask for your name, ID, next of kin and many details. You could do all that and still don’t get the loan. When you get to the end you do not see the terms so you wonder,” said Philip Ochieng.