Kenyan central bank plans digital lender clampdown
Kenya’s central bank has digital lenders firmly in its sights as it submits new legislation to better regulate the sector.
Amendments to the Central Bank of Kenya (CBK) Act, submitted the country’s parliament last week, would see the central bank regulatory power over digital lenders.
The change comes amid stronger moves from the central to curb the influence of unregulated lenders.
Earlier this year CBK clamped down on the mobile-based firms. It prevented them from passing the names of credit defaulters owing less than KES 1,000 ($9) to reference bureaus.
More than 3.2 million Kenyans had been negatively listed as loan defaulters, as concerns mount over predatory lending practices from start-ups.
Punishing interest rates see borrowers forced to pay as much as 520% interest when their rates are annualised.
M-Shwari, founded by Safaricom and Commercial Bank of Africa in 2012, is a Kenyan leader in this space.
The firm has lent as much as $2.1 billion in loans since 2018, and charges a facilitation fee of 7.5% on credit regardless of the loan’s duration. This can push annualised loan interest rates up to 395%.