•Njoroge said that the credit only mobile institutions are not regulated by CBK and such, their customers are exposed to exploitation
•In addition to customer exploitation, Njoroge that the platforms could be conduits for money laundering and thus the need to regulate them
Central Bank Governor Patrick Njoroge on Wednesday raised a red flag over the proliferation of unregulated online money lending firms.
Njoroge said that the credit only mobile intuitions are not regulated by the CBK and, as such, their customers are exposed to exploitation.
The digital platforms leverage on mobile phones platforms to provide credit and other digital finances to consumers desperate for cash.
“These entities are currently not regulated by CBK [and] concerns have arisen such as data privacy, source of funds and consumer protection,” he said.
He said there have been complaints about the high-interest rates or transaction fees, multiple borrowing from different lenders, non-disclosure of pricing or terms and lack of complaints or dispute resolution mechanism.
Appearing before the Senate’s ICT committee, Njoroge said there is a huge lacuna in the current financial and customer protection laws which the institutions are exploiting to exploit consumers. The committee was chaired by Vice-chairperson Halake Abshiro.
“They are only less than one per cent of the financial service providers in the market, but even a match [stick] is enough to burn the entire petrol station. We are basically playing with a match stick in a petrol station because the institutions are enough to bring down the entire financial sector,” he said.
In addition to customer exploitation, Njoroge that the platforms could be conduits for money laundering and thus the need to regulate them.
“We see these [online lenders] as a major and potential problem. We have that they need to be regulated,” he added.
CBK is mandated by law to regulate the financial sector to ensure the customers are exploited.
Commercial Banks, micro-finance institutions, chamaas and Saccos are the institutions under the CBK’s armpit.
Njoroge appeared the committee alongside ICT PS Jerome Ochieng and Communication Authority director-general Francis Wangusi respond to concerns raised by Ole Kina on the protection of customer data by telecos.
The governor’s revelations sparked uproar, with Narok Senator Ledama Ole Kina taking on the governor for not protecting customers.
The Governor said the credit-only mobile institutions are registered by registrar of companies and use their own money, not customer deposits, to lend out to customers.
“They are coming because some of our people are desperate for cash, maybe for fees. They usually have no choice but to consent under duress. So, I think we need to provide more channels of lending to the consumers,” he said.
Njoroge was further put to task over the highest rates on loans advanced by telecommunication companies such as Safaricom’s M-Shwari loan, Fuliza among others.
“Why are interest rates on the loans advances by the telcos higher than the 14 per cent as provided in law?” Ole Kina posed.
He explained to the committee that loan products provided by the telecos are as a result of their [telcos] agreement with banks which actually provide the loans advanced to customers.
The governor said the banks charge 14 per cent but admitted the figure has been higher because of the charges imposed by the telcos.
PS Ochieng said that the telcos are bound by law to protect customer data against any form of intrusion.