The Digital Lenders Association of Kenya (DLAK), which was recently formed to address the digital lending challenges in Kenya, now seeks to influence the coming regulation on digital lending through a legislative lobby.
The Central Bank of Kenya (CBK) has recently raised concerns over the unregulated digital lending space claiming that the over-exploitative nature of the players demand regulation that limit their influence.
According to the DLAK website:
“The main objective of the organization is to set ethical and professional standards in the industry, to collaborate with policy makers and other stakeholders in addressing industry issues, contribute to knowledge and learning and to drive the overall growth of the digital lending and fintech sector in line with the Economic Pillar of the Vision 2030, MTP III and the Big Four Agenda.”
The new association consists of some of the top digital lenders in kenya namely:
- Alternative Circle
- Stawika Capital
- Zenka Finance
- Okolea, LPesa
- Four Kings Investment T/A Sotiwa
- Kuwazo Capital
- Mobile Financial Solutions (MFS)
- Finance Plan Ltd
According to the chairperson of the DLAK association, Robert Masinde:
“A vibrant and diverse digital lending sector has successfully established itself in the country and we feel the time is right to give it a voice and promote global best standards. DLAK will enable digital lenders to speak with a common voice, promote best practices, and influence how the sector develops while promoting the ethical business practice to the benefit of customers.”
Despite the association’s efforts to set best practices in the unregulated digital lending space in Kenya, CBK has stated that it will not allow the players to self-regulate, and will instead come up with regulations currently being considered.
The digital lending space is currently unregulated which has resulted in Kenyans being exploited by the players which has seen huge interest rates being charged on mobile services being offered.
To counter this effect, the CBK has launched Stawi, a loan facility for micro, small, and medium enterprises in Kenya. Stawi, in partnership with 5 Kenyan banks, offers loans at only 9 percent per annum in comparison to some mobile lenders who charge up to 300% in interest rate in some cases.
Speaking on the needed regulation, the CBK governor, Patrick Njoroge has said:
“This is why you need to have regulation based on specific principles most important being the protection of Wanjiku.”
Very few lenders are however pushing for education in the space and instead focus on disbursing loans and growing their customer base according to Hilda Moraa, CEO, Pezesha, a platform that connects lenders and borrowers in Kenya.
“We need normalization and sanity in the credit space.” ~ Hilda Moraa, CEO, Pezesha.
Digital lending has no doubt contributed to financial inclusion in Kenya. Some however, would argue that this has come at a cost to the borrowers. As mobile lending evolves, we’re starting to see the emergence of crypto credit which is only going to increase as crypto adoption takes root.
The emerging crypto credit space will no doubt offer better lending services due to the transparency, global, and permissioned offerings that come with it.