The Central Bank of Kenya (Cbk) will regulate lending rates for digital lenders operating in the country. This emerges from some of the proposed amendments to the Central Bank of Kenya Bill for 2020.
If required by law, the CBK will regulate the monthly interest rates that may be charged by digital cell phone lenders such as increases or other loan fees. It will also set a limit on bad loans at a maximum of twice the defaulted loan.
When the law goes into effect, the CBK will regulate the monthly interest rates that can be charged by digital cell phone lenders
This means that Apex-Bank must approve price increases or the introduction of new products for digital micro-lenders operating in Kenya. Like other commercial banks, these platforms would have to be approved by the authorities before any major change.
According to a communication on the bill, its main objective is to amend the Central Bank of Kenya law to regulate the behavior of digital financial products and services. It is then the responsibility of banking regulators to ensure fair access to credit.
This move comes a few months after banking regulators stopped these digital micro-lenders Blacklist defaulters at the country’s credit bureaus.
By and large, these digital microcredit review steps are the result of a number of complaints about their predatory practices. This includes loan interest rates of up to 520% per year, harassment of friends and family, and questionable information about loan terms.
The predatory lending problem is not unique to Kenya. Last year several of these predatory lenders showed up on the Google Play Store, and the tech giant had to create new rules to stem the tide of predatory practices.
Even so, some of these apps still exist on the Google Play Store, and little has been done to stop the tide. We have them in Nigeria emerging practice of predatory lending; a practice which the regulators seem to have escaped.
With the COVID-19 pandemic bringing many harsh economic ramifications, borrowers are Finding Loan Ease, but lending companies are likely to have many defaults. Still, it makes sense to put an end to financial practices that people could put into debt.
The original version of this article appeared on Techpoint Africa on July 20. Do you see it Here.
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