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DIGITAL LOANS

Mobile shylocks robbing Kenyans - CBK

Fintechs are taking advantage of cash strapped consumers .

In Summary

•A report by Financial Services Deepening- Kenya on digital lending shows there are at least 49 online credit providers in the country

•These Fintechs are now taking advantage of cash strapped consumers who lack adequate information on lending rates offered by the platforms

 

CBK governor Patrick Njoroge
CBK governor Patrick Njoroge
Image: FILE

The Central Bank of Kenya wants digital lending applications to be regulated just like financial products are manned in the  banking sector.

Speaking at a post Monetary Policy Committee media briefing, CBK governor Patrick Njoroge said the wave of unlicensed digital financial service platforms was robbing desperate Kenyans instead of providing lending solutions.

“They (digital lenders) have grown like mushrooms in the country and are not really working for Wanjiku,” Njoroge said.

A multitude of online lenders have continued to thrive in the local market, offering loans at exorbitant interest rates and ruthlessly going after individuals who default by engaging their family members with data mined through the applications.

“Some of these lending apps have been displaying shylock-like behaviour while hiding behind nice-looking applications,” Njoroge said.

He said, the lack of adequate guidelines has opened up room for rogue players making it hard for consumers to differentiate from ethical lending platforms.

Having been in place for more than two and a half years now, the law capping interest rates which made it nearly impossible for individuals to access credit from formal financial institutions, drove them to opt for digital loan platforms.

Data by the Central Bank however shows lending to private sector credit has been on an upward trend since June last year, recorded at 7.9 per cent last month.

This performance outranks credit to sectors like agriculture, building and construction, real estate,transport and communication, business services and mining.

These Fintechs are now taking advantage of cash strapped consumers who lack adequate information on lending rates offered by the platforms.

 

Mobile lending apps, some linked to banks, are now charging between 70 and 180 per cent interest per year. Many customers don't notice because the interest is charged monthly or daily.

According to Consumer Downtown Association, these quick loans have become a regular go-to for majority of households in the country who rely on the credit as a source of livelihood.

“These loans, though highly priced are tempting to hapless borrowers. It is about time monthly interest charged was regulated. They have been deceiving borrowers,” CDA executive director Japheth Ogutu said.

A report by Financial Services Deepening- Kenya on digital lending shows there are at least 49 online credit providers in the country, with one being launched each year.