Kenya Is Doubling Down on Regulating Mobile Loan Apps to Combat Predatory Lending
By Yomi Kazeem
Digital lending companies operating in Kenya are set up for a shake-up.
The country’s central bank is proposing new laws to regulate monthly interest rates levied on loans by digital lenders in a bid to stamp out what it deems predatory practices. If approved, digital lenders will require approval from the central bank to increase lending rates or launch new products.
The move comes in the wake of mounting concern about the scale of predatory lending given the proliferation of startups offering online, collateral-free loans in Kenya. Unlike traditional banks which require a paperwork-intensive process and collateral, digital lending apps dispense quick loans, often within minutes, and determine creditworthiness by scouring smartphone data including SMS, call logs, bank balance messages and bill payment receipts. It’s an offering that’s predictably gained traction among middle-class and lower income earners who typically found access to credit through traditional banks out of reach.
Photo courtesy of Anaya Katlego.