Microlender Jijenge Credit Limited is among the ten digital credit providers (DCPs) that made it to the regulator’s initial list of those licensed to operate in Kenya following the September 17 application deadline.
The Central bank of Kenya (CBK) had in January directed all DCPs in the country to apply afresh for licenses as part of a vetting exercise meant to weed out dodgy mobile loan firms that were violating and abusing their privileges.
Out of the 288 applications received by the regulator, only 10 DCPs have been accepted in the early list by the CBK.
“CBK has received 288 applications since March 2022 and has worked closely with the applicants over the last six months in reviewing their applications. So far, 10 applicants have now been licensed as DCPs, pursuant to the CBK Act and the Regulations,” noted the regulator in a statement Monday.
The regulator, however, clarified on Monday that other applicants will be listed over a non-specified period of time as it continues with the vetting process of the applications filed before it which are at different stages.
Others include Ceres Tech Limited, Getcash Capital Limited, Glando Africa Limited (Trading as Flash Credit Africa), Kweli Smart Solutions Limited, Mwanzo Credit Limited, MyWagepay Limited, Rewot Ciro Limited, Sevi Innovation Limited and Sokhela Limited.
The 6-month process began in March this year following a successful public participation procedure on the draft Digital Credit Providers Regulations that followed the December 7, 2021 Presidential assent on the Central Bank of Kenya (Amendment) Act, 2021, which became effective on December 23, 2021.
The new law now allows the central bank to regulate digital lenders, following public concerns about predatory practices by some unregulated digital credit providers.
Such firms according to CBK governor Dr. Patrick Njoroge were violating consumer privacy besides charging exorbitant high interest costs on mobile loans, as well as using unethical debt collection practices.
“The Regulations provide for inter alia the licensing, governance, and credit operations of Digital Credit Providers (DCPs). They further provide for consumer protection, credit information sharing, and elaborate on the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) obligations of DCPs,” notes CBK.
In 2020 for instance, the CBK’s Njoroge barred 64 mobile-based lenders from using credit reference bureaus (CRBs) and subsequently withdrew the approvals granted to unregulated credit-only lenders as third-party credit information providers to CRBs.
The outgoing CBK boss while making the announcement cited numerous public complaints over misuse of the credit Information System by the unregulated digital and credit-only lenders, and particularly their poor responsiveness to customer complaints.
Companies that fail to meet the strict consumer protection rules risk being shut down, and are required to provide a Certificate of Incorporation, Memorandum and Articles of Association of the applicant and that of any significant shareholder.
A 2021 FSD Kenya estimates that 35 percent of Kenyan digital borrowers use digital credit to meet day-to-day household needs while 37 percent borrow for business reasons – a common trend that is likely to continue according to the latest report by McKinsey & Company.
Kenya’s financial technology (fintech) industry is one of the 11 African markets expected to witness unprecedented growth in the next three years, according to last month’s report which analyzed disruptive fintech trends and industry projections.
The global consulting firm says Kenya will contribute a chunk of the continent’s growth numbers owing to its global reputation in fintech innovation and other infrastructural advantages in comparison to its continental peers.
“If the sector overall can reach similar levels of penetration to those seen in Kenya, a country with one of the highest levels of fintech penetration in the world, we estimate that African fintech revenues could reach eight times their current value by 2025,” reads in part the McKinsey report.
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