•Should the legislation be enacted, CBK will license all entities that provide loans through the internet, mobile and computer devices.
•The bill sponsored by the Finance committee chairperson Gladys Wanga (Homa Bay Woman Representative) provides that a digital credit amounts to a facility or arrangement where money is lent or borrowed through a digital channel.
The government has embarked on a fresh bid to place digital lenders under the watch of the Central Bank of Kenya.
If amendments to the CBK Act before the National Assembly are passed, the bank will monitor digital lender’s activities to curb money laundering and terrorism financing.
The plan is spelt in the Central Bank of Kenya Amendment Bill, 2021 which is expected for First Reading when the assembly resumes sittings on May 4.
Should the legislation be enacted, CBK will license all entities that provide loans through the internet, mobile and computer devices and any other digital system as CBK would prescribe.
The bill sponsored by the Finance committee chairperson Gladys Wanga (Homa Bay Woman Representative) provides that a digital credit amounts to a facility or arrangement where money is lent or borrowed through a digital channel.
Persons or companies which are in the business of providing credit facilities or loan services digitally will be required to register with CBK within six months of the bill’s enactment.
CBK would thus license and supervise digital credit providers not regulated under any other written law as is the current case where lenders operate under no strict regime.
“The current position is that there is no legal framework governing digital borrowing platforms,” Wanga said in the bill’s memorandum.
Mobile money lenders are not recognized as financial institutions under regulation and supervision by CBK under the Banking Act.
There are concerns that owing to the situation, it has been hard to clip unethical practices among them mining of customers’ private data, overpriced loans, and defaulter parading.
“As such, the CBK will have an obligation of ensuring that there is a fair and non-discriminatory marketplace for access to credit,” the MP said.
In what would change the times for the lenders, CBK will determine their capital adequacy requirements; minimum liquidity requirements.
The bank is also being mandated in the proposed law to approve digital channels and business models through which digital credit business may be conducted.
CBK will also supervise digital credit providers, suspend or revoke licenses of lenders in breach of the law, and give directives on necessary changes.
Once the regime kicks in, unregistered lenders would be guilty of an offence and would risk three years in jail or Sh5 million fine or both.
“A person shall not carry on any digital credit business unless that person has been licensed by The Bank under this Act or is permitted to do so under any other written law,” the bill reads.
“An application for a license shall be made to the bank in such form and shall be accompanied by such information and fee as may be prescribed.”
Central Bank will, within three months of the enactment of the bill, draw regulations to provide for the registration requirements for digital credit businesses.
“Any regulations required to be made under this Act, to give effect to the provisions on digital lending, shall be made within three months of the coming into force of this Act.”
The regulations, the bill reads, will also provide management requirements for the credit providers; permissible and prohibited activities.
Also to be provided are measures for countering terrorism financing and money laundering as well as provisions for credit information sharing.
The regulations will also spell measures for data protection; consumer protection; reporting requirements for digital credit providers; as well as offences and penalties.
Lawmakers have been on the drive to tighten the noose on digital lenders and shylocks considering a nearly similar initiative by Nominated MP Gideon Keter.
In his bill which was first read on February 25, Keter sought that CBK role be expanded for it to license and regulate all persons, institutions, and firms lending money to Kenyans.
He wants agencies lending money to have two directors, and foreign ones to have at least one director who is a Kenyan citizen.
For licensing, the Keter bill said a copy of a company's memorandum and articles of association as well as a verified registered place of business stating the location of head office and branches would be required.
Edited by Kiilu Damaris