Over 337 unregulated digital mobile lenders and micro-financiers have been blocked form forwarding the names of loan defaulters to credit reference bureaus (CRBs).
Central Bank of Kenya (CBK) said that the number of companies allowed to blacklist loan defaulters has decreased to 2,254 in September from 2,332 in May 2019.
The decrease is linked to the CBK directive delinking unregulated digital money lenders from CRBs after public outcry over widespread misuse of the credit information-sharing mechanism.
Companies such as Tala and Branch were locked out at a time when the bulk of accounts negatively listed with CRBs are linked to digital borrowers.
CRBs include Metropol, TransUnion, and Creditinfo International.
“The withdrawal is in response to numerous public complaints over misuse of the CIS (credit information sharing) by unregulated digital and credit-only lenders, and particularly their poor responsiveness to customer complaints,” the CBK said in an earlier statement.
In the new regulations, only defaults above Sh1,000 will be shared with CRBs.
Borrowers who had been blacklisted for lower amounts are now required to be cleared unconditionally.
Over 3.2 million Kenyans were negatively listed as loan defaulters amid job cuts and reduced earnings caused by the Covid-19 pandemic impact on the Kenyan economy.
CRB data revealed that the number of accounts jumped from 2.7 million in 2019 with the majority of them having borrowed less than Sh1,000.
Digital Lenders Association of Kenya (DLAC) chairman Ivan Mbowa has blamed unscrupulous newcomers in the mobile money lending sector for their ejection from CRB listing.
Mbowa, who is also the Tala chief executive officer, said that the first 15-20 digital money lenders adhere to a code of conduct that ensures that they uphold the highest standards in their operations.
“We support regulation. Not all lenders adhere to the same standards. You see this in the way some lenders do their collections from customers and defaulters. You also see this in the way some competitors structure their contracts,” said Mbowa.
The Tala CEO said DLAK was formed to ensures that customers are treated with humanity and dignity when it comes to loan collections and contracting.
The CBK ejection from CRB listing followed a public outcry over the widespread misuse of the credit information-sharing mechanism.
Some digital money lenders have been known to call or text contacts of borrowers in unscrupulous ways to force defaulters to pay back their loans.
Some even intimidate or “threat” to recover their money from close contacts of defaulters.