MPs probe should lead to regulatory reforms in funding models

The current regulatory vacuum in Kenya's BNPL sector poses significant risks to service providers. Operational uncertainty, unfair competition, diminished investor confidence, and eroded consumer trust all threaten the sustainability of these businesses.

Some critics have pointed to the lack of insurance coverage and driving licenses among riders as issues, unfairly blaming BNPL service providers. This criticism overlooks the contractual obligations and the broader responsibilities of the riders themselves.

The BNPL model provides the means to acquire the motorcycle, but it is up to the rider to comply with legal and safety regulations. The primary responsibility for obtaining insurance and a driving license lies with the motorcycle owner.

Secondly, motorbike theft is a multifaceted issue that extends beyond BNPL financing. Factors such as inadequate law enforcement, high unemployment rates, and insufficient urban planning contribute significantly to the problem. The primary responsibility for the security of motorbikes lies with the owners, not the financiers. BNPL service providers facilitate ownership but do not manage the day-to-day security of the assets.

Thirdly, lack of standardised interest rates on loans has also drawn criticism, often misplaced towards BNPL service providers. This perspective overlooks the broader financial ecosystem and the inherent flexibility of the BNPL model. Interest rates on loans, including those offered through BNPL models, vary due to several factors such as credit risk, loan tenure, market conditions, and individual borrower profiles.

Fourthly, when customers enter into a BNPL agreement, they sign a contract that clearly outlines the terms and conditions, including the consequences of defaulting on payments. Repossession is a standard clause in such agreements, serving as a protective measure for the service providers to mitigate financial risk. Blaming BNPL providers for repossessing motorcycles ignores the importance of financial responsibility on the part of the borrowers. It is essential for customers to honour their repayment commitments to maintain the integrity of the financial agreement.

And lastly, establishing a clear regulatory framework is essential to create a stable and fair environment, enabling BNPL providers to thrive and contribute positively to Kenya's financial ecosystem. By implementing regulations that protect the consumers and lenders and ensure market stability, policymakers can harness the benefits of BNPL while mitigating its risks. As the model continues to grow, the need for a legislative framework becomes increasingly critical. The State must play its pivotal in shaping the future of the BNPL industry.

-Mr Panya is a business strategist and consultant