Monthly interest rates charged by the digital mobile lenders and borrowers’ non-performing loans will now be regulated by the Central Bank of Kenya (CBK).
This will come into effect should the National Assembly adopt a law that is currently before the house.
The CBK (Amendment) Bill 2020 will empower the regulator to keep digital lenders in check to curb the emerging number of borrowing rates that has left many Kenyans in debt.
The digital lenders have previously been accused of charging high-interest rates, predatory lending tactics as well as using illegal methods to recover loans including debt-shaming among others.
The new law will ensure the digital lenders adopt the same rules as commercial banks in the country.
The CBK Governor Dr. Patrick Njoroge had earlier warned digital lenders in Kenya that there was no room to self-regulate.
During a press briefing at the CBK building in April, Dr. Njoroge said digital lenders who are not ready to be regulated should exit Kenyan Market.
“We have the framework to use while working with unregulated digital lenders. Those that cannot service must go, Kenya is not their place.” Said Dr. Njoroge.
The slam was in response to numerous public complaints about misuse of the Credit Information Sharing System (CIS) by the unregulated digital and credit-only lenders, and particularly their poor responsiveness to customer complaints.
According to the latest guidelines released by the CBK, unregulated digital and credit-only lenders, are no longer allowed to submit credit information on their borrowers to Credit Reference Bureaus (CRBs).
“With immediate effect, CBK has withdrawn issuance of approvals to mobile-based, unregulated digital and credit-only lenders as third party credit information providers to CRBs.” Said CBK in a statement.
This happens in the wake of a debt-ridden country, with the National Treasury setting out extra tax avenues to widen the taxman’s revenue collections.