CBK is Prepping a Digital Lending Charter to Police Aggressive Mobile Lenders


The discussions around mobile lending apps and their overall benefit to the Kenya user have been explored exhaustively. The apps have been around for more than half a decade, and while they have made millions of Kenyans get access to credit (50% of local loans are app-based), the same borrowers have been linked to harassment cases when they default or take an extended period to furnish their loans. The mode of operation of loan apps is also not guided by a solid legal framework, which has made the firms behind the tools get away with a ton of malpractices as echoed by disgruntled users across several social media platforms.

As we reported more than one year ago, our fears that the apps are becoming worse each passing day were confirmed by the Central Bank of Kenya, CBK, which admitted that its regulatory framework was limited to traditional financial institutions such as banks. The CBK further said that it has a constrained wiggle room to police digital financial platforms such as loan apps. The challenges have made it way too easy for such businesses to thrive, albeit controversially in the Kenyan soil if the number of fintech apps dispensing loans to users on Google Play Store is anything to by.

While the CBK has been dragging its feet to regulate the space, Google issued a new set of rules for mobile loan apps towards the end of 2019. The details of the regulations by the American corporation can be found here, and it saw, at the beginning of 2020, a number of apps, most of them operating in Kenya among other emerging markets such as India kicked out of the Store. Some of the culprits include Opera’s creations, namely Okash and OPesa that have been accused of subjecting customers to outrageous terms, such as a two-week repayment period, insane interest rates and outright harassment for defaulters.

The harassment part does not sit well with a lot of people. See, loan apps are equipped with permissions that scan and upload your contact list to the companies behind them. Some random numbers are then contacted to shame a borrower into paying up. In fact, in Indonesia, loan apps have been reported to form WhatsApp groups with a user’s contact list and then tells members to ask you to pay. It is as controversial as it sounds, but we have not seen local lenders go up to those lengths. Nevertheless, it paints a very bad picture of their mode of operation, and while some of them, especially established ones such as Branch are generally fine, Kenyans are crying foul over their aggressiveness.

The CBK has been lobbying for tougher policing of the space through the National Payment Systems Act. The lobbying has been around since 2018, and Kenyans have not been any key developments from the CBK until now. According to the monetary authority, a digital lending charter that will guide app-based lending should be out in the near future. We are looking forward to clauses that will tame lenders from harassing customers, as well as a provision that will task lenders to educate customers on the benefits of financial literacy. A privacy clause is likely going to be part of the charter because many customers feel that their privacy is being violated.