The Central Bank of Kenya (CBK) is going after digital lenders operating in the country. The changes were part of the proposed amendments to the 2020 Central Bank of Kenya Amendment Bill 2020.
Once the new proposals become law, CBK can regulate the monthly interest rate charged by digital lenders. The same oversight authority pertains to any other loan charged. Such measures put a limit on the non-performing loans so they do not exceed the principal amount due to punitive interest charges.
There are reported cases of 520% per year interest charged on loans, harassing of family and loved ones, and vague terms on loan details. Predatory lenders last year registered on the Google Playstore prompting the company to impose strict rules to stem their access.
The Central Bank has to approve price increases on the launch of any new product or targeting Kenyan micro-lenders. A part of the bill intends to amend the Central Bank of Kenya Act regulating how digital financial products handle their products and services and ensure access to fair credit.
This comes a few months after the Credit Revenue Bureau was directed to stop blacklisting defaulters for the period before April 1 according to a proposal issued by President Uhuru Kenyatta on March 25. The Central Bank of Kenya ordered the agency to de-list defaulters instead.
The economic shock of the Covid-19 pandemic has affected many people who are opting for financial relief from lending platforms. Unfortunately, digital lenders are also facing an increased number of defaulters. However, the new regulatory moves are a good step in curbing predatory digital lenders whose unchecked operations were driving more people into financial ruin.