• Around 2.7 million digital borrowers have been blacklisted by the Credit Reference Bureau.
• Annual interest rates can be as high as 150 percent for mobile loans.
Yesterday Governor Patrick Njoroge said that the Central Bank Kenya would start regulating mobile phone lenders in October (see P8).
This move is long overdue. Around 2.7 million digital borrowers have been blacklisted by the Credit Reference Bureau because of minor defaults. The CBK is going to give a grace period of six months to mobile loan borrowers before they are blacklisted.
A much more critical issue is the extortionate interest rates charged by mobile lenders. Annual interest rates can be as high as 150 percent but borrowers don't realise because the repayment period may be just a few days.
Ironically commercial banks have not been allowed to charge a market interest rate because of the rate cap but mobile phone lenders could charge whatever they want.
The Digital Lenders Association of Kenya has pleaded for self-regulation but Njoroge insisted that CBK will supervise them. He is right — it is too tempting for digital lenders to make super profits from unsuspecting lenders.
But Njoroge should still allow digital lenders to charge more than the commercial banks because their loans are completely unsecured.
Quote of the day: "To create something exceptional, your mindset must be relentlessly focused on the smallest detail."
The Italian fashion designer was born on July 11, 1934