Following public outcry on the unregulated digital lending market the Competition Authority of Kenya(CAK) has commissioned a sector study on the credit markets in Kenya.
“The main objective of the study is to identify and address potential consumer protection concerns in the regulated and unregulated digital credit markets,” the authority said in a gazette statement.
In 2019 the government, Financial Sector Deepening (FSD) and the Bill and Melinda Gates Foundation in a study found that dozens of mobile lending apps are operating with virtually no regulatory controls.
Through the study , CAK will identify potential consumer protection risks and consumer outcomes within Kenya’s digital credit sector.
The Authority also targets to ensure digital lenders increase transparency of products they offer and terms and conditions to the customers.
According to a recent report by the Kenya Bankers Association, borrowers who access digital loans are hardly aware of the costs, while lenders are doing little to educate them.
It will also seek to address fraud and improve consumer redress in getting digital credit services.
The study will also seek to increase consumers control over their personal information as digital lenders have been found to be exploiting borrowers “insider information in a bid to recover debts.
In the long run CAK hopes to develop policies that will ensure digital loanees are protected across regulated and unregulated lenders.
The unregulated credit-only institutions are fast growing partly due to people’s desperation for money.
Before the scrap of the rate cap there had been an increased appetite for digital loans, leading dozens of unregulated firms to invest in Kenya’s credit market in response to demand for quick loans.
Digital Lenders Association (DLAK) also called for stronger guidelines and regulations by the Central bank and the National Treasury in order to shield consumers from rogue mobile lenders.
