Lawmakers told to tame ‘greedy’ mobile lenders

Central Bank of Kenya Governor Patrick Njoroge when he appeared before the Senate ICT Committee on the protection of customer data by telecommunication companies at County Hall, Nairobi on Wednesday October 7, 2019. [Boniface Okendo,Standard]

The banking sector regulator now wants Parliament to draft a law to rein in mobile lenders whom it accuses of taking advantage of desperate Kenyans to charge exorbitant interest rates.

Central Bank of Kenya (CBK) Governor Dr Patrick Njoroge yesterday told the Senate Committee on ICT that credit-only mobile entities are too exploitative in their repayment terms as they are currently not within the regulator’s purview.

Dr Njoroge asked Parliament to urgently come up with a legal framework on how such digital lenders can be regulated to stop them from further exploiting their customers, who are mainly desperate Kenyans seeking quick loans.

“These entities are not regulated by the financial regulator. It is a big problem for us; it’s not just a lacuna but a huge lacuna in law”.

“There is no specific law that is targeted at them on how they are supposed to operate and be regulated, unlike in the case with commercial banks, Saccos and even chamas. We see their operations as a major problem and we feel that they need to be regulated,” Dr Njoroge told the committee.

This is despite CBK having strongly opposed the Financial Market Conduct Bill drafted by the National Treasury, which had proposed mechanisms to crack down on financial technology (fintech) lenders by licensing them and punishing those that imposed punitive rates.

Njoroge has also dismissed an effort by 12 mobile lenders - Tala, Alternative Circle, Stawika Capital, Zenka Finance, MyCredit, Okolea, Lpesa, Kopacent, Four Kings Investment, Kuwazo Capital and Finance Plan - under the umbrella of the Digital Lenders Association of Kenya to self-regulate.

“I must caution that (entertaining their operations), we are playing with matches at a petrol station, and the dangers are very clear. As the regulator of financial institutions, we are aware and we are working with other regulatory agencies to find a way that these entities can be regulated,” said the governor. Njoroge told the committee that the entities were not making full disclosures in the interest of consumer protection and were thus charging very high interest rates and transaction fees.

He said there were also no complaints and dispute resolution mechanism.

Responding to a query by Narok Senator Ledama Ole Kina on whether Safaricom’s popular overdraft facility Fuliza was among the said unregulated digital financial services, Dr Njoroge clarified that it is offered by the Commercial Bank of Africa, with the money being channelled through Safaricom.

Ole Kina said CBK should consider separating the pay services operated by telecommunication companies so as to enhance their regulation.

“M-Pesa should, for example, be separated from Safaricom and so should Airtel Money,” he said.