Google has taken steps to ban unauthorised loan apps operating in Kenya from its Play Store, the market on Android devices.
With effect from January 31, 2023, Google will require instant loan apps operating in Kenya to show evidence of Central Bank license, failure to which they will be removed from Play Store. This is in adherence to the Central Bank Amendment Act of 2021.
Digital Credit Providers had until, September 17th, 2022, to apply for new licenses from the Central Bank or risk being forced to close their lending businesses.
According to the most recent update from the Central Bank, of the 288 loan apps that applied for licenses, only 10 have been permitted.
As per Google, in order to be approved on the Google Play Store as mobile digital lender in Kenya;
- Digital Credit Providers (DCP) should complete the DCP registration process and obtain a license from the Central Bank of Kenya (CBK). A DCP must provide a copy of license from the CBK.
- A platform that is not directly engaged in money lending activities and is only providing a platform to facilitate money lending by registered DCP(s) to users will need to accurately reflect this in the declaration while providing a copy of the DCP license of the respective partner(s).
- Google said it will only accept declarations and licenses from entities published under the Directory of Digital Credit Providers on the official website of the CBK.
The American multinational tech firm said that the new update is part of the requirements for personal loan apps in India, Indonesia, the Philippines, Nigeria, and Kenya, one of the few countries in the world that have enacted laws to regulate the mobile digital lending industry.
CBK’s Regulation of Mobile Loan Apps
Google’s action also comes after numerous consumer complaints forcing the Central Bank to issue set of guidelines to be followed by digital lending firms. The long list of guidelines include disclosure of all hidden costs, no use unethical debt collection practices, source of funds company owners, pricing model and parameters, certificate of good conduct, tax compliance certificate and CRB report for each shareholder, director and senior officer.
Unregulated instant loan providers have typically targeted individuals from low-income groups without a clear understanding of the loan process, who were looking for quick access to funds. While these instant loan apps offered small-ticket loans of anywhere between KES 500 and KES 50,000, some charged interest rates of more than 100% per annum, as well as similar late fee charges.
Additionally, such apps would gain access to a user’s entire contact list. Failing to repay the loans would lead to these platforms not only charging exorbitant interest and penalties — but also contacting family and friends of the defaulting customers, in addition to harassing them with abusive messages.