Kenyans will be pleased with Senate’s move on mobile loans apps

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A report on digital lending released by Financial Services Deepening Kenya (FDS) in August last year shows that there are 49 digital credit providers in the country, with a new one launching every year.

This forced Central Bank of Kenya (CBK) governor Patrick Njoroge to declare digital lenders worse than village shylocks.

“At least shylocks hide. These platforms shout about themselves openly while impoverishing Kenyans,” Njoroge told the Parliamentary Committee on Communications, Information and Innovation in August last year.

The interest rate capping of August 2016 forced desperate Kenyans to turn to informal sources of credit, including saccos, shylocks and digital lenders which charge exorbitant interest rates.

A popular app, Branch International has a flexible weekly payment plan under which customers who borrow Sh500 pay a total of Sh76 as interest in four weeks. This is an equivalent of 15.2 per cent per month.

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Another app, Tala has disbursed over 5.6 million loans worth Sh30 billion to over one million customers since its launch in March 2014 as M-Kopo Rahisi.

According to reports, by mid-2017 Branch had disbursed 1.5 million loans worth Sh3.63 billion to 350,000 customers since its launch in April 2015.

Central Bank of Kenya (CBK) governor Patrick Njoroge says digital lenders are worse than village shylocks.

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Speaking at a post Monetary Policy Committee media briefing, CBK governor Patrick Njoroge said the wave of unlicensed digital financial service platforms was robbing desperate Kenyans instead of providing lending solutions.

“They (digital lenders) have grown like mushrooms in the country and are not really working for Wanjiku,” Njoroge said.

“Some of these lending apps have been displaying shylock-like behaviour while hiding behind nice-looking applications,” Njoroge said.

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He said, the lack of adequate guidelines has opened up room for rogue players making it hard for consumers to differentiate from ethical lending platforms.

“Some of these lending apps have been displaying shylock-like behaviour while hiding behind nice-looking applications,” he added.

He said, the lack of adequate guidelines has opened up room for rogue players making it hard for consumers to differentiate from ethical lending platforms.

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But now if Senate passes a motion by Nominated Senator Alice Milgo, seeking to regulate the digital money platforms is adopted by the house, mobile lending apps will be regulated by CBK and CA.

“My appeal is that this house, urges the government to regulate this mobile lending platforms and provide an oversight authority to regulate them,” Senator Milgo saidy esterday as she persuaded colleagues to back the motion.

“The oversight authority will vet and scrutinise the lucrative interest rates and review the penalties applied by digital lenders,” she explained.

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Contributing to the motion, Senators Johnson Sakaja (Nairobi) and his nominated colleagues Isaac Mwaura and Haji Farhiya decried  the mobile lending apps had not only become a thorn in the flesh of many Kenyans but had unfortunately replaced traditional shylocks.

Instead of the mobile lending apps, improving the lives of many Kenyans, regrettably a majority of them had become prisoners, they said.

Mwaura, accused financial institutions of circumventing the law to making humongous profit through the mobile lending platforms by charging high interest rates.

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