Concern as Kenyans borrow from multiple digital lenders amid financial constraints

Digital credit providers have raised concerns over the increasing indebtedness in the country, which has been occasioned by the harsh economic times.

Data from the Digital Financial Services Association of Kenya shows that digital lenders in Kenya serve a total of 8 million customers disbursing between Ksh.10 billion to Ksh.15 billion per month.

however, their lack of a credit information-sharing framework has left them exposed to fraudsters who do not meet their debt obligation.

“We just released the Money Match Report recently and we earned that 6 puts of every 10 Kenyans have more than one loan so when you start to think about these statistics in a market where we've seen high inflation it starts to raise the kind of challenges Kenyans are facing,” said Annstella Mumbi, Tala’s General Manager for Kenya.

Gideon Kipyakwai, the Chief Executive Officer of Metropol, added “Today, we were discussing a case of one borrower who has borrowed from 30 institutions and has not paid any of them but that happened because in 2020 the fintech and micro fiancé institutions were removed from the CRB so digital lenders were not allowed to share data with the bureaus.”

The Office of Data Protection Commissioner has received close to 4000, complaints on digital lenders with 2,325 being determined.

The commission has issued enforcement notices to 150, while 36 cases were determined and closed, with ongoing investigations targeting 9 other cases. 

This is according to Commissioner Immaculate Kassait who says the commission has fined some digital lenders up to Ksh.5 million for breach of data laws.

The commission now says it is considering sharing information on digital credit providers who frequently infringe on the customers' data with the central bank for further action. this comes as digital lenders moved towards building a credit information-sharing framework to reduce over-indebtedness in the country.

it is these challenges that digital lenders are now seeking to address through collaboration with regulators and industry players.

They also noted that by working in collaboration with the data protection office, cases of harassment and debt shaming by digital lenders have declined, protecting customers from unnecessary stigmatization.

“We've come up with guidance notes that have helped digital lenders to be more compliant this compliance has therefore reduced the number of complaints against digital lenders and reduced the incidences of debt shaming by rogue lenders,” said Kevin Mutiso, the Chairman of DFSAK.

Commisioner Kassait added, “If we have registered you as a digital lender and there is a repeat offence as a digital lender as an office, we are considering sharing this kind of information with the central bank so that even as they register you as a digital lender they are aware that that has been a violation of the Data Protection Act.”

According to the Central Bank of Kenya, only 51 digital lenders have been licensed to operate in Kenya, while over 500 others have submitted their applications.