Unscrupulous Digital Lenders Warned By CBK Governor

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Digital loan apps have been tossing netizens here and there, with some paving way for fraud and losses, because they were unregulated. But hawk-eyed Central Bank has picked the dirt in this business and has raised its concern over the mushrooming digital loan apps putting out a notice to the unlicensed and unregulated digital lenders to protect consumers from fraudulent dealers.

Insisting on the need for digital lenders to be guided by the interest rates caps introduced in 2016, CBK Boss encouraged the public to be on the lookout, to avoid being duped by unscrupulous operators who are exploiting consumers’ ignorance.

“All financial services and products will soon have a label of approval by the CBK to be able to guide users on which products to use. As the body which regulates commercial banks and deposit-taking microfinance institutions, we will ensure that merchants don’t take advantage of Kenyans who are seeking quick loans,” said CBK Boss Patrick Njoroge during the rollout of Stawi loan app, government loan product to SME’s at Kondele market in Kisumu.

In May, Members of parliament asked the Central Bank of Kenya to publish regulations that will see interest rates charged by more than 500 unregulated digital microlenders controlled by the banking watchdog with the National Assembly’s Information, Communications and Technology (ICT) committee necessitating the banking regulator to ensure the digital lenders are guided by the interest caps introduced in 2016.

These lenders, who charge borrowers interest of between 18 per cent and 200 per cent, have been exploiting the market that has become more lucrative than mainstream banking where lending rates are capped by law. MPs suggested that the interest rates should be those applicable to commercial banks for standardisation to pave way for SME’s to access the loans. This was in response to a rise in demand for quick loans and the freeze in commercial bank lending to individuals and small business after interest rate caps.

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