Revelation that more than 2.5 million borrowers have been blacklisted from accessing loans is a crisis in waiting. The number keeps growing as more digital lending platforms enter the East African region.
When listed with credit reference bureaus, it means borrowers cannot access credit from the traditional lenders and digital platforms. They could also easily miss out on jobs that demand they present a positive credit report.
The cases of borrowers sinking into deep debt as they ravenously take up loans for personal consumption are widespread. There are more than 50 mobile and online credit providers offering loans at a click of a button. But this convenience comes at a high cost, with some apps offering interest rates as high as 150 per cent a year. This has seen borrowers juggle loans from different digital credit providers. Indeed, most of them are borrowing from one platform to pay another, a situation that has driven them into a debt trap. This is what has created a loans crisis, where some Kenyans have taken loans from multiple lenders but have defaulted.
After sports betting, which has created gambling addicts, the next major issue the government must deal with is coming up with regulations to curb unscrupulous digital lenders that charge unreasonable fees. CBK Governor Patrick Njoroge has hinted at introducing legislation to police mobile lenders within the banking regulations. He needs support.