Law to regulate digital lenders comes into effect - CBK

Central Bank of Kenya Governor Patrick Njoroge. [David Gichuru, Standard]

The Central Bank of Kenya (Amendment) Act 2021, a law that allows CBK to license and supervise digital lenders has come into effect today.

This follows assentation by the President on December 7.

The Amendment Act will now provide CBK with the powers to license and oversight previously unregulated digital credit providers.

While announcing the draft Digital Credit Providers Regulations today, the CBK said “this is a significant milestone” 

The law now removes the regulation lacuna that had attracted public outcry about the pricing of digital loans and the extent lenders could go in recovering their money from defaulters without breaching privacy.

“Concerns have been raised by the public about predatory practices of the unregulated digital credit providers, and in particular, their high cost, unethical debt collection practices, and abuse of personal information,” CBK noted.

According to the Central Bank, the proposed regulations provide for the licensing, governance, and credit operations of Digital Credit Providers (DCPs).

They also provide for consumer protection, credit information sharing, and elaborate on the Anti-Money Laundering and Combating the Financing of Terrorism obligations of DCPs.

CBK will then publish the regulations within three months from the date the law is effective, on March 23, 2022.

Owners of unregulated DCPs are required to provide their business details to CBK by January 21.

The Central Bank has also invited members of the public to comment on the regulations.

“In line with public participation requirements, CBK invites interested members of the public to provide comments on the draft regulations, which can be downloaded from the CBK website.”

Earlier this month, Digital Lenders Association of Kenya (DLAK) Chairperson Kevin Mutiso told The Standard that the coming of the lenders under CBK was a win for consumers and the fintech community.

“This is a positive step for the industry and the fintech community worldwide, and we look forward to working closely with the regulator to protect the consumer and to continue to develop innovative solutions for this market,” he said.