In recent times digital credit platforms have gained popularity owing to their being easy to use, and the speed of each transaction.
However, many of these lenders pose a threat to users, whose credit ratings risk taking a hit due to the often short repayment period.
The Central Bank of Kenya (CBK) has been trying to regulate the digital lending space in Kenya at the behest of parliamentarians in March this year.
Studies showed that more than 2.7 million Kenyans had been blacklisted due to minor defaults.
At the start of this week the CBK issued a notice saying digital loans should be treated the same as normal bank loans.
Loan defaulters will only be blacklisted by the Credit Reference Bureau should they be in default for longer than six months.
Previously the CRB handled digital loans differently from bank loans, making it more likely for digital borrowers to land on the CRB list of defaulters.
Before regulation online credit companies had been accused of exploiting borrowers by charging high interest rates and imposing short repayment periods, without properly assessing an individual’s ability to repay them in the first place.
Recently these online credit firms formed the Digital lenders association of Kenya, whose aim is to self-regulate.
CBK governor Patrick Njoroge however, insists that the lenders must be regulated by an independent authority.
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CBK governor Njoroge said to the media, “There is no such place for self-regulation. The danger relates to the conflict of interest; this is why you need to have regulation based on specific principles most important being the protection of Wanjiku.”
This new regulation by the is set to take effect in October 2019 and will only apply to digital lenders that are licensed by the CBK.
