The Central Bank of Kenya (CBK) governor Dr Patrick Njoroge has advocated for the regularisation of fintech lenders. The financial lending sector in the country has been growing steadily with over 20 companies exploiting the widely-used mobile money platforms to offer credit that is made accessible to everyone. Unfortunately, these loans are offered at high-interest rates.
The ease of accessing loans in Kenya has greatly improved since Kenyans can now get credit directly to their mobile phones in minutes.
“There’s an increase in let’s say financial-type institutions that are taking advantage of our population,” said Dr Njoroge at a digital financial services industry conference in Nairobi. “In a sense what has happened is there is an opportunity for some predators and they are preying on our population.”
Sadly, the ease of accessing credit has also increased the number of defaulters with a study by financial services consultancy Microsave indicating that in the last three years, 2.7 million Kenyans listed by the Credit Reference Bureau for defaulting loans.
Kenya Has a Become a Test Lab for Lending Platforms
Dr Njoroge said he abhorred the fact that Kenya is being used as a ‘guinea pig’ for new technology by foreign firms.
“What I think is worrisome is a lot of products that are coming in a sort of a fly-by-night operation and you only hear about it because somebody gets burned,” he said adding that these fintech startups are exposing Kenyans to risks hence the need to regulate the space.
Currently, the Financial Markets Conduct Bill 2018, published by the Treasury, proposes the creation of a Financial Markets Conduct Authority to regulate access to credit. It is, however, not clear if the regulation includes mobile lending apps as well.
In addition, the Bill has been criticised for being a threat to the CBK by overlapping with duties already being carried out by other government entities.
It is also unclear whether digital lenders are covered by the cap on interest rates introduced in 2016.
In light of the uncertainty surrounding the regulation of fintech lenders, the exploitation of Kenyans, who pay high-interest rates to receive quick loans, will continue.