A law passed by Kenya’s parliament to regulate digital lenders is now in force as the country responds to various complaints of bad and harmful practices against the lenders.
Referred to as the Central Bank of Kenya (Amendment) Act, 2021, the law authorizes the country’s apex bank to license and oversee the previously unregulated digital credit providers – several of whom have been accused of charging very high interest rates and harassment of defaulters.
The bank that credits digital technology for transforming Kenya’s financial sector has however identified a string of drawbacks:
- High cost
- Unethical Debt collection practices
- Abuse of personal information
As a result, the bank plans to launch regulations to govern the country’s vibrant fintech sector by March 23, 2022.
Some of the touchpoints in the regulatory framework include:
- Licensing, governance, and credit operations of Digital Credit Providers (DCPs)
- Consumer Protection
- Credit Information Sharing
- Provide Clarity on AML/CFT for DCPs
The new law explicitly grants the Central Bank of Kenya the powers to determine pricing parameters. This will ensure that CBK does not necessarily set the lending rate but rather provide parameters within which digital credit providers shall set their cost of credit.
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