Regulate online money lending – Senators

Legislators say digital lenders are robbing Kenyans with exploitative interest rates

In Summary

•Most borrowers are poor and do not have plans to repay the loans

•Many Kenyans have become prisoners of these systems

Tala app, an online financial micro-lending platform, a mobile phone in this photo illustration
Tala app, an online financial micro-lending platform, a mobile phone in this photo illustration

Senators have asked the government to regulate the proliferating online money lending platforms.

The lawmakers said digital lenders are robbing Kenyans with their exploitative interest rates and should be checked before the situation gets out of hand.

Senator Alice Milgo yesterday said most Kenyans, especially the vulnerable youths, have been reduced to paupers and can no longer borrow since they have been blacklisted by the Credit Reference Bureau for defaulting.

“Many Kenyans have become prisoners of these systems. There is excessive borrowing among lower-income households,” Senator Milgo said.

She said that the fact that the loans are easy to obtain and are readily available on smartphones, most vulnerable, low-income Kenyans have developed an appetite for them despite their exploitative interest rates.

Most borrowers, she said, are poor and do have plans to repay the loans, and are thus forced to register multiple phone numbers to make multiple borrowing to pay those that fall due.

They borrow to buy food, pay school fees and place bets, she said.

“This high appetite for quick loans is best illustrated by the growth of Fuliza, a Safaricom overdraft service, such that within one month, Kenyans had borrowed Sh6.2 billion, Sh29 billion in three months and Sh45 billion in six months,” she said.

She said there is need for legislation and an authority to vet the firms and regulate the interest rates.

Data from Transunion Credit Reference Bureau show more than 500,000 people, mostly youths, have been blacklisted by CRB.

Bungoma Senator Moses Wetang'ula said there is a need to re-introduce the Money Lenders Act, which was repealed and its contents consolidated in the CBK Act, to protect the lenders.

“In this country today, almost every household owes money to somebody. Informal, online, shylocks and all those unlawful acts of lending money is in Kenya,” he said.

Wetang'ula said some lenders charge as high as 10 per cent per month, translating into about 120 per cent per year. This, he said, is exploitative and should be regulated to save the country.

He challenged Majority leader Kipchumba Murkomen to come up with a law to regulate the online money lenders.

Nairobi Senator Johnson Sakaja said, “We need regulation. Interest rates are too high, deposits are not protected or guaranteed. Many of our people are getting lost in debt because of these platforms.”