Finance debt

CBK directive on CRB listing lost 4 million customers for online lenders

Digital lenders have been offering their services to Kenyans for a long time without any sort of regulation from the CBK or key parties like the Office of the Data Commissioner.

The wiggle room has seen the apps grow dramatically, and with their business model of offering loans to Kenyans without any kind of collateral, that means their interest rates, as well as the repayment period, have been punitive.

Apps, even so far, still harass failers and have also come under scrutiny for blatant abuse of user data. Hell, some borrowers wouldn’t even be able to access their services if they had multiple loan apps on their devices.

The problems are known to many, which is why the developments of the recent pasts aim to tame the space once and for all.

Specifically, in 2019, the Kenya Banking Charter proposed strict regulations for digital lenders.

In 2020, the CBK announced that it was preparing a digital lending charter to control aggressive mobile lenders.

Over the next few months, it was revealed that unregulated mobile lenders, which essentially means the lion’s share of Kenya’s digital lenders, could not access the CRB where defaulters are listed.

That was not all. The CBK has even said it will revoke the licenses of debt-shaming lenders if the contents of the CBK Bill, 2021, are passed by the President. In a similar vein, the Kenya data protection commissioner’s office has started investigating loan applications that have since been reported to misuse clients’ personal data. In fact, it is so bad that these lenders could face lawsuits and heavy fines in other countries like Nigeria.

Now we know that the CBK has ordered lenders to register clients with CRB mainly because the country is going through tough economic times.

The directive came into effect in April 2021 for all loans below KES 5 million.

This, according to online lenders, has reduced the motivation of borrowers to repay their loans.

It is also for this same reason that some clients have reported that they can no longer access loans online, given that it was so easy to do so in the past.

Online lenders add that they were disbursing up to KES 4 billion per month before the directive. Their services also had up to 6 million customers.

Now companies can only pay between KES 1 and 2 billion per month.

The number of customers has also dropped to around 2 million.

We’ll have to wait and see if that changes when the directive is lifted in five months. At the same time, we hope that the Office of the Data Commissioner, CBK, and its CBK Bill, 2021, will monitor the space so that customers are protected from the predatory nature of loan applications.