NAIROBI, Kenya, Jul 16 – Before getting a mobile loan, you will be receiving a message from Central Bank of Kenya (CBK) informing you whether the mobile lending firm has been approved by the regulator.
CBK Governor Patrick Njoroge says the regulator is planning on launching the service, which will see it give a mark of approval to mobile lending firms, in a bid to protect customers from unregulated mobile lenders.
Among firms that are yet to be approved by the regulator include Tala, MyCredit and Okolea among others.
“We want to ensure that the consumer is not being taken advantage of, and that the client’s information is secure,” the governor said.
He was speaking during the opening of the Afro-Asia Fintech Festival in Nairobi.
Apps that are already regulated by CBK include M-shwari, Fuliza, KCB-Mpesa, Stawi for SMEs and other online financial products offered by local commercial banks.
Last month, Digital Lenders Association of Kenya (DLAK) members launched a self-regulating program saying it was a member’s initiative and was not initiated as a result of pressure from the bank regulator.
DLAK Chairperson Robert Masinde said the move to adopt a self-regulatory framework was a member’s initiative, not in any way influenced by the bank regulator.
The lenders are currently estimated to constitute less than one percent of the total financial services industry.
Banks, micro financiers, and saccos are regulated under the CBK Act and the National Payment System Act while chamas are regulated under the Societies Act.
CBK licenses and regulates electronic retail payment services providers in addition to all deposit-taking financial institutions.
The regulator has also raised concerns with customer data protection by credit-only lenders, the high-interest rates or transaction fees that they charge on borrowers, multiple borrowing from different lenders, non-disclosure of pricing terms and their lack of dispute resolution mechanisms.
The unregulated credit-only institutions are fast-growing partly due to people’s desperation for cash, healthcare or school fees.
Borrowers in most cases enter into the arrangements out of desperation.