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Hope For Cheaper Loans From Mobile Loan Apps As Mps Nod To Regulatory Bill

Tala
Tala mobile loan app. [PHOTO/ COURTESY]

MPs will start debating a new Bill aimed at regulating mobile loan apps that will see them put under the watch of the Central Bank of Kenya (CBK).

The Bill, which has already been accepted in Parliament will issue guidelines that will protect borrowers from predatory lending, including regulating lending rates and treatment of defaulters.

Kenyans and stakeholders will now be invited to give their views on the Central Bank of Kenya (Amendment) Bill of 2020 which is before the National Assembly committee on Finance and National Planning.

“The proposed amendment seeks to achieve the following objectives, prohibit any person, institution or firm from lending money to Kenyans unless licensed by the Central Bank of Kenya,” says a notice on the bill.

The Bill will give CBK supervisory and licensing powers over the mobile lending apps, which have been operating under their own rules.

Read: Why Mobile Loan Apps Are Nolonger Lending To Some Customers

The bill has been sponsored by nominated Member of Parliament Gideon Keter.

In April 2020, CBK withdrew the approvals granted to digital (mobile-based) and credit-only lenders as third party credit information providers to Credit Reference Bureaus (CRBs).

The withdrawal was in response to numerous public complaints over misuse of the Credit Information Sharing System (CIS) by the unregulated digital and credit-only lenders, and particularly their poor responsiveness to customer complaints. Thus, unregulated digital and credit-only lenders no longer submit credit information on their borrowers to CRBs.

Among lenders that were affected included Tala, Alternative Circle, Stawika Capital, Zenka Finance, MyCredit, Okolea, LPesa, Kopacent, Four Kings Investment T/A Sotiwa, Mobile Financial Solutions (MFS), Kuwazo Capital, and Finance Plan Ltd. Other members include Branch, Vaell, Roamtech solutions, Aspira and MicroMobile.

Read: Unpaid Mobile Loans Hurting Kazi Mtaani Beneficiaries

Several of these lenders charge interest rates as high as 520 percent per annum, with Tala and Branch charging rates of 152.4 percent and 132 percent respectively.

M-Shwari charges a “facilitation fee” of 7.5 percent on credit regardless of its duration, pushing its annualised loan rate to 395 percent.

As of September 2018, there were 110 mobile loan apps on the two main app stores from 74 unique developers. 65 of these were pulled down as of April 2019, while 47 new ones were developed by 43 unique developers.

This brought down the number to 92 as of April 2019 in the app stores, but the number could be higher owing to new developments.

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Written by Francis Muli

Senior reporter at Kahawa Tungu, Muli has a passion for human interest stories. Believes in unearthing societal rots that have been hidden from the public eye.
Follow me on Twitter @FmuliKE. Email francis@kahawatungu.com

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