The Central Bank of Kenya has issued a six-month ultimatum to digital credit providers, also known as digital lending platforms, requiring them to apply for new operating licenses before providing credit services for Kenyans in accordance with new legislation in that regard. This the Central Bank governor Patrick Njoroge said would be gazetted under the new law that monitors and guides the previously unregulated industry. In December 2021, President Uhuru Kenyatta passed the law that gave the CBK oversight responsibilities on digital lenders, giving it the authorities to punish organizations who contravene the law by breaching customer privacy. Prior to this, the modus operandi of digital lenders was the so-called “shaming technique”. Under Kenya’s new law, such acts are prohibited and digital lenders have to comply or cease operation. Business Edge narrows down on the new law on digital lenders in Kenya and Lekan Onabanjo discusses with Dr XN Iraki of the University of Nairobi who joins in from Kenya’s capital city.
Kenya in the last two decades has been known to develop rapidly, especially in the area of financial technology and has been described as the “Silicon Savannah” in some quarters. This enabling environment has attracted innovators from all over the world. The first digital lender of this kind is the telecommunications company Safaricom which introduced transfer and credit services about ten years ago. Since then, there has been an influx of companies who offer the same service, absent of any regulation by the Central Bank of Kenya. Their constant breach of privacy, Dr Iraki says, has led to calls for their regulation and monitoring by millions of users who have been thusly treated.
Dr Iraki also avers that the unprecedented growth of digital credit services is because they have been unregulated in the past and they’ve operated however they deemed fit. Regulating them will stop this growth and customers will be better protected. The flip side is that many of these companies will be out of business.
The full conversation on Business Edge is embedded above.