- They were previously only required to register the businesses to begin operations in the country.
- Out of 700 microfinance institutions and digital lenders that had applied for licenses, only 22 have received CBK’s nod.
Credit-only microfinance institution, Jijenge Credit has backed calls by the Central Bank of Kenya (CBK) on heightened oversight of Digital Credit Providers (DCPs) in the country saying the move “was the right one.”
The new regulations by the country’s financial regulator, came into force in September last year requiring all digital lenders to get a license from the country’s monetary authority or wind down their operations.
But as of March 2023, data by the Central Bank shows that of the close to 700 microfinance institutions and digital lenders that had applied for licenses, only 22 have received CBK’s nod to continue lending, with notable big mobile lending platforms missing from the list.
The regulator came up with the regulations for digital lenders (both credit-only microfinance and mobile phone lenders) have been categorized as digital credit providers following an outcry of predatory lending as well as concerns of money laundering.
“The licensing and oversight of DCPs as indicated previously, was precipitated by concerns raised by the public about the predatory practices of the unregulated DCPs, and in particular, their high cost, unethical debt collection practices, and the abuse of personal information,” notes the CBK in its March update.
Further adding that, “This is to ensure adherence to the relevant laws and importantly that the interests of customers are safeguarded.”
The digital lenders were previously only required to register the businesses to begin operations in the country.
“We believe the move by the regulator is the right one and will go a long way in building trust in a sector that has emerged as a promising platform for the economically underserved to escape the debt traps of informal and discretionary lenders,” said Peter Macharia, CEO Jijenge Credit Limited.
The firm is heavily involved in the disbursements of quick logbook loans, salary check-off bid bonds and salary check-off loans.
Most of the firm’s logbook loan customers are people looking for emergency loans to sort out situations that require quick credit.
Disclosing the source of funds, the CBK says, is also meant to ensure that lenders are not engaging in financial crimes like money laundering.
It means digital lenders like Jijenge Credit are now required to play under the same rules as commercial banks, including having to seek the CBK’s nod for new products and pricing that includes loan charges and putting a ceiling on non-performing loans at not more than twice the defaulted amount.
“We use a different strategy from other mobile lenders as we combine traditional banking and digital. We ensure that we meet the set requirements that go against vices like money laundering and ensure that fraud is abated to zero,” says Macharia.
Some of the approved digital lenders include Getcash Capital Limited, Giando Africa Limited, Kweli Smart Solutions Limited, Jumo Kenya Limited, MFS Technologies Limited, and M-Kopa Loan Kenya Limited.
The first 10 applicants that made it to the CBK’s initial list include Ceres Tech Limited, Getcash Capital Limited, Glando Africa Limited (Trading as Flash Credit Africa), Jijenge Credit Limited and Kweli Smart Solutions Limited.
Others include Mwanzo Credit Limited, MyWagepay Limited, Rewot Ciro Limited, Sevi Innovation Limited and Sokhela Limited.
Mobile phone lenders are also required to disclose the total charges for their loans, including interest rates, late payment and rollover fees, before disbursing credit to customers.
Former President Uhuru Kenyatta in December 2021 approved a change in law that allowed the central bank to regulate digital lenders, a move that gave the bank power to rein in lenders who violate consumer privacy.