CBK says mobile lenders could be used as money laundering avenues ▷ Kenya News

- CBK boss said mobile lenders do not use customer deposits for business and thus it was important to know their source of finances

- He warned that some players could be engaging in illegal activities and then come to lend money to the public

- The lenders have also been on spot for charging exorbitant interest rates and lacking dispute resolution methods

- Njoroge told Parliamentarians there was urgent need to develop guidelines to arrest indiscipline that may crop up from the sector

Central Bank of Kenya (CBK) has expressed concern that the thriving mobile money lending business could be a conduit for circulating illegally acquired money in the economy.

Addressing Senate Committee on ICT on Wednesday, July 10, CBK Governor Patrick Njoroge said unlike banks, the credit only facilities did not use customer deposits to do business.

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CBK boss Patrick Njoroge said mobile lenders do not use customer deposits for business like other lenders do. Photo: UGC
Source: UGC

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Some of the lenders, Njoroge said could be using personal finances that could also be proceeds of ill businesses but lend it to cash hungry Kenyans in a move to sanitise their riches.

"There is a huge lacuna because there is no specific law that is targeted at them. There are gaps because we have laws for commercial banks and not credit-only institutions that use individual resources for lending. In fact, these institutions are nothing but shylocks," said Njoroge.

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Mobile lenders, the CBK boss said posed serious risks to the economy besides just being problematic to the regulator.

He attributed this to their ability to grow very fast noting it was time proper guidelines be set to arrest any looming crisis that may be occasioned by the lenders.

"It is problematic to CBK when you think of money laundering. We see a major weakness because they can upscale very quickly and we need to regulate them because they have to be right-sized since they are not using depositors’ money and they are not under prudential guidelines," Njoroge told the committee.

The lenders have also been on spot for charging exorbitant interest rates and lacking dispute resolution methods. Photo: UGC
Source: UGC

READ ALSO: Cytonn Money Market Fund goes digital, transactions to take less than 3 minutes

The CBK also pointed out that personal data that creditors acquire from their customers was at the risk of being misused.

Currently, there has been concern that some lenders acquire contacts from borrowers and go to extents of informing people in their phonebooks that their friends have defaulted on a loan.

"I think we need to provide more channels for lending to consumers and some banks have gone this way," Njoroge stated.

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Source: Tuko