The Central Bank of Kenya(CBK) has directed unregulated digital lenders to cease operations in the country following the lapse of the 6-month registration period that required them to comply with the Digital Credit Providers regulations.
Under the regulations, all digital lenders were expected to apply for licenses from the banking regulator before September 17.
Gazettement of the regulations follows the signing into law of the Central Bank Act, 2021 in December, bringing digital lenders under the watch of the banking regulator for the first time.
This is due to concerns raised by the public about the predatory practices of digital lenders, among them, high costs, unethical debt collection practices, and the abuse of personal information.
The lenders had also been accused of not disclosing the full terms of their credit leading to costly interest rates that rise up to 520 percent when annualized.
Under the new regulations, the lenders are barred from sharing borrowers’ information with third parties and they are also required to seek CBK approval for interest on their loans.
They will also be required to disclose all terms of their credit to borrowers.
So far, the Central Bank of Kenya has licensed 10 applicants as digital credit providers, pursuant to the CBK Act and the Regulations.
The lenders that have so far been approved include:
Ceres Tech Limited
Getcash Capital Limited
Giando Africa Limited (Trading as Flash Credit Africa)
Jijenge Credit Limited
Kweli Smart Solutions
Limited Mwanzo Credit Limited
MyWagepay Limited
Rewot Ciro Limited
Sevi Innovation Limited
Sokohela
The regulator however issued a warning to the unregulated DCPs who did not apply for licensing to desist from conducting digital credit business. The transition period for all unregulated DCPS to apply for a license ended on September 17, 2022.
“This is pursuant to Section 59(2) of the Central Bank of Kenya Act (CBK Act), that required all operating unregulated DCPs to apply to CBK for a license within six months of the publication of the Central Bank of Kenya (Digital Credit Providers) Regulations, 2022 (the Regulations), i.e., by September 17, 2022, or cease operations.”
CBK noted that the regulation was vital due to the concerns raised by the public about the unregulated DCPs.
“The licensing and oversight of DCPs as indicated previously was precipitated by concerns raised by the public about the predatory practices of the unregulated DCPs, and in particular, their high cost, unethical debt collection practices, and the abuse of personal information.”