What New Mobile Loans Bill Means For You

Should the Bill become law the CBK will regulate, among other things, pricing of digital loans, sharing of borrowers’ information and management of digital lending firms. It gives unregulated digital lenders six months to comply with the new licensing requirements and be deemed compliant.

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Importantly, the Finance Committee also agreed to include a clause to allow digital lenders to submit reports to Credit Reference Bureaus (CRBs). Digital credit providers were frozen from filing CRB reports or listing defaulters in April 2020 amid abuse of the credit information sharing system.

The move led to a 50% decline in loans issued in the second half of 2020, according to the Digital Lenders Association of Kenya (DLAK).

CBK Governor Patrick Njoroge had earlier this year urged Parliament to enable digital lenders’ return to use of the system once the Central Bank Amendment Bill 2021 was passed establishing a watchdog and draft regulations.

“The committee agreed to the proposal so that digital lenders are allowed to disclose any positive or negative information of its customers to the licensed credit reference bureaus…The information so provided must be only that which is necessary for the discharge of the function of the digital lenders and the licensed credit reference bureaus,” the committee noted in its review of the Bill.

The bill places digital lenders under the ambit of CBK much like commercial banks, saccos and micro-finance institutions. The committee, however, dropped a requirement that would have seen CBK determine minimum liquidity and capital adequacy requirements for digital lenders in Kenya like it does for banks.

The committee argued that as they were not deposit-taking entities, the digital credit providers posed no threat to public funds.

To counter money laundering and terrorism financing, the Bill requires digital lenders to disclose sources of the money they are lending.

“The committee has explicitly granted CBK powers to determine pricing parameters.

“This will ensure that CBK does not necessarily set the lending rate but rather provide parameters within which digital credit providers shall set the cost of credit,” observed Digital Lenders Association of Kenya (DLAK) Chairman Kevin Mutiso.

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