- Regulations to be gazetted later this month to pave way for the licensing and oversight
- CBK governor Patrick Njoroge said regulation will bring sanity to the sector prone to consumer abuse
Image: EZEKIEL AMING'A
Digital lenders have until September to apply for fresh licenses from the Central Bank of Kenya (CBK) or close shop.
Speaking at this year's World Consumer Rights Day Celebration, CBK governor Patrick Njoroge said regulations governing Digital Credit Providers will be gazetted later this month to pave way for the licensing and oversight by the apex bank.
He added that the regulation will bring sanity to the sector prone to consumer abuse in total disregard of the country's updated National Payment System.
"No other country has put together a document that is as protective of the consumer as the National Payments Strategy. We require Payments Service Providers to put in place a working customer complaints system," Njoroge said at the fete themed 'Fair Digital Finance'.
He termed the NPS as a secure, fast, efficient, and collaborative payments system anchored on core principles of trust, security, usefulness, choice and innovation.
In December, President Uhuru Kenyatta approved the Central Bank Amendment Bill, 2021 giving CBK powers to regulate non-deposit-taking credit providers who have remained largely unregulated for a long time.
The law empowers the regulator to revoke permits of digital lenders who breach the confidentiality of personal information to pursue defaulting borrowers and those charging extremely high rates on loans.
Yesterday, the country's pioneer digital lender Tala termed the new law as a game-changer for the sector saying it presents a safe operating environment.
In an interview with the Star, Tala’s Country Growth manager Annstella Mumbi said the law creates a better foundation for building better financial habits in the country which are key to social-economic transformation.
"The law does not only put digital lenders in check but also pushes them to take part in financial literacy in the market, a role Tala has been playing through its Money March initiative,'' Mumbi said.
The digital lender in collaboration with the Digital Lenders Association of Kenya (DLAK) are conducting various activities to sensitise consumers and the general public on financial discipline.
This year, the lender and the lobby are hosting podcasts, social media campaigns among other activities to teach the public about safe borrowing and wealth creation and growth.
This as the latest data by the Financial Sector Deepening (FSD Kenya) paints a sorry state of the country's financial health.
According to 2021, FinAccess Household Survey, the overall financial health of Kenya's adult population deteriorated to 17.1 per cent last year compared to 21.7 per cent in 2019 attributed to high financial illiteracy.
Kenya lags behind its East Africa peers in terms of savings.
The report by EFG Hermes that looks at different investment options in the country shows that Kenya's saving rate is at 12 per cent, way below Africa's average of 17 per cent.
This is half of the average for low-income countries (26 per cent of GDP).
By contrast, neighbouring Uganda and Tanzania have already crossed the 20 per cent mark even though their per capita income is significantly lower.