Digital lenders welcome CBK backed regulation

The Digital Lenders Association of Kenya (DLAK) has welcomed the recent regulation as drafted by the Parliamentary Finance and Planning Committee which proposes to have digital lenders under the regulatory ambit of the Central Bank of Kenya (CBK).

However, they propose to add provisions concerning the non-applicability to digital lenders of other provisions of the Central Bank of Kenya (Amendment) Bill than those indicated in the regulations.

“This is because digital lenders use their own capital (non-deposit-taking institutions) and have a limited scope of activities i.e. are solely focused on granting small loans. Therefore applying the same rules to Digital Lenders as for banks is asymmetrical and would create an enormous regulatory and compliance burden for Digital Lenders that they cannot realistically bear,”  DLAK Chairman Kevin Mutiso said in a statement on Tuesday.

They also suggested that the regulation focus in the registration process of lending companies instead of a license, pointing out that “this is a common practice for the Digital Lenders regulations implemented in significant jurisdictions in the EU like Spain and Poland, we can also find such regulation in Australia.”

The digital lenders also propose that all customers shall be provided with clear, transparent, and articulated information on the pricing of the loans before they apply for the loan by providing the conclusion of the loan agreement in the unified form with the key financial information concerning the loan.

Additionally, in order to increase consumer protection, they propose to establish a position of a financial ombudsman within the CBK structures, responsible for examining customer complaints.

 The digital lenders further want the CBK to allow them into the credit information sharing system from which they were locked out at the onset of the COVID-19 pandemic.

“We propose to add direct regulation that the Digital Credit Providers will be entitled to receive the reports from CRBs and to submit the reports with credit information to CRBs as well. It is justified to restore Digital Lenders’ access to submit credit information reports on the terms applicable to other market players as the principal object of this Regulation is to regulate the digital lenders’ industry,” reads the statement.

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