Digital lenders in last-minute rush for CBK licensing

Digital lenders are rushing to comply with Central Bank of Kenya (CBK) licensing requirements ahead of Saturday’s deadline.

The lenders have in the last six months held engagements with the reserve bank which is now set to oversight the operations of the mobile-only credit providers from sunset on Saturday.

Digital Lenders Association of Kenya (DLAK) Chairperson Kevin Mutiso said the licensing process has gone on seamlessly barring ‘minimal hiccups’.

Mutiso who leads an industry lobby of leading digital lenders including Tala, Alternative Circle and Zenka did not however divulge further details on the number of lenders licensed so far in an interview with Citizen Digital on Thursday.

CBK finalized the 2021 digital credit providers’ regulations in mid-March which include a number of provisions to safeguard borrowers.

Among the regulations is the prohibition of unauthorized or unsolicited calls to borrowers’ contacts in the quest for debt recovery.

The regulation further bars the use of obscene language, improper debt collection tactics and other conduct whose consequence is to harass, oppress or abuse.

The CBK is not expected to set interest rates on digital lending but has restricted the credit providers from recovering amounts greater than the principal loan in the case of customer default.

Digital lenders who will not have obtained CBK licensing by the close of business Saturday will be required to cease operations.

Industry experts have welcomed the regulation of the fintech players following widespread public outcry by rogue operators in the sector.

“For a while, Kenya suffered a digital lending regulatory lacuna because we had no regulations governing these products. We saw a range of malpractices including the excessively high cost of credit, unethical debt collection practices and abuse of personal information,” PwC said in a legal alert earlier this month.

“It is widely accepted that to protect vulnerable consumers and maintain market stability, we need regulation.”

The Central Bank of Kenya (Amendment), Act 2021 which came into force in December granted the CBK supervisory powers over digital credit providers.