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Senate questions effectiveness of digital lending regulations

The lamented that desperate Kenyans are still being exploited and manhandled by lenders.

In Summary
  • In December last year, President Uhuru Kenyatta signed to law the Central Bank of Kenya (Amendment) Bill that sought to among others, end debt shaming by the lenders.
  • In March, CBK gazetted Digital Credit Providers Regulations to officially place the digital money lending business under regulations.
Tala app, an online financial micro lending platform is seen on a mobile phone in this photo illustration taken May 23, 2018.
Tala app, an online financial micro lending platform is seen on a mobile phone in this photo illustration taken May 23, 2018.
Image: REUTERS/Thomas Mukoya/Illustration

Senators have questioned the effectiveness and enforceability of the recently developed regulations meant to tame rogue digital money lenders.

The lawmakers lamented that despite the amendment to the CBK Act and the development of policies to regulate the sector, desperate Kenyans are still being exploited and manhandled by lenders.

Laikipia Senator John Kinyua sparked the debate in the chamber last Thursday when he petitioned the House to interrogate the operations of the money lenders.

In the petition directed at the House’s Finance and Budget Committee, Kinyua wants the panel to examine the effectiveness of the regulations.

“The committee should examine the effectiveness and enforceability of the recently enacted Digital Credit Providers Regulations 2022, which seeks to curb dishonest players and not to protect customers,” he said.

In December last year, President Uhuru Kenyatta signed to law the Central Bank of Kenya (Amendment) Bill that sought among others, to end debt shaming by the lenders.

In March, CBK gazetted Digital Credit Providers Regulations to officially place the digital money lending business under regulations.

The senator demanded that the committee summons CBK boss Patrick Njoroge to disclose the number of digital credit providers operating in the country.

Their terms and conditions of credits should also be disclosed, he said.

“The committee should state measures to protect households and MSEs from predatory lending by digital credit providers outlining targeted interventions against the fraudulent transfer of property resulting from defaulting on these loans,” he said.

Njoroge should explain to the committee the measures put in place by the CBK to mitigate financial risk exposure due to the rise in digital credit borrowing.

Reacting to the petition, Nandi senator Samson Cherargei said the CBK government should disclose the names of all persons licensed to do the digital money lending business.

“We need to know these faceless individuals that have to be licensed by the CBK to do credit digital lending,” he said.

“Who are they? Where is the Deposit Protection Fund (DPF)? Where is the recourse for our people if these digital credit lending institutions collapse?” the senator said.

The vocal senator regretted that the exploitative lenders are taking advantage of the desperate who have been pushed to borrow by poverty.

“Most Kenyans are listed in the Credit Reference Bureau (CRB) because of digital credit lending. It is because of poverty and the high cost of living,” he reckoned.

“It is only in Kenya where the people are left to the mercies of the sharks in each industry, from roads to the cost of living,” he added.

Contributing to the debate, nominated senator Gertrude Musuruve said that most online lenders have become fraudsters and that the need for stringent law to tame them.

“We need to know the number of digital lending companies that have been allowed to operate in this country,” she said.

“They should be traceable so that in the event of anything, then they can be followed to ensure transparency,” Musuruve added.

She said the businesses should also pay tax even if they are digital.

“They operate under zero tax and they should not be zero-rated. Digital lenders should also account to the Kenya Revenue Authority (KRA) and pay tax,” she said.