The Central Bank of Kenya (CBK) has published the legislation governing digital lenders, clearing the path for their control and supervision.
It focuses on high-interest rates, unethical debt collection techniques, and some digital lenders’ exploitation of personal data.
The Digital Credit Providers laws, according to CBK governor Patrick Njoroge, are intended to address public concerns about the significant development of digital lending, particularly through mobile phones.
“The regulations provide for inter alia the licensing, governance, and lending practices of DCPs. They also provide for consumer protection, credit information sharing, and outline the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) obligations of DCPs,” Njoroge said.
According to him, the legislation will sanitize a sector that is prone to consumer abuse while ignoring the country’s National Payment System.
Last week, Njoroge gave the lenders six months to obtain new licenses.
“Regulations governing Digital Credit Providers will be gazetted later this month to pave way for the licensing and oversight of DCPs by CBK,” said Njoroge.
“All previously unregulated DCPs will be required to apply to CBK for a license by September 2022 or cease operations.”
The Digital Credit Providers Regulations of 2021 gave the CBK the authority to revoke the licenses of companies that use name-and-shame tactics to collect money by sending information about loan defaulters to third parties.
“The bank may suspend or revoke a license by written notice to the holder of the license if the licensee (digital lender) is in breach of subsection (2A) or the conditions of the Data Protection Act or the Consumer Protection Act,” the law reads in part.
Lenders must now seek for licenses from the CBK, as opposed to merely registering to do business in the East African country earlier.