Competition in the digital lending business is set to get stiffer with an increase in the number of digital lenders licensed by the Central Bank of Kenya (CBK).
The directory of digital credit providers published by CBK, dated 20th January 2023 added 12 more firms, bringing the total to 22.
New entrants issued with permits include Ceres Tech Limited, Getcash Capital Limited, Giando Africa Limited (Trading as Flash Credit Africa), and Jijenge Credit Limited.
Others are Kweli Smart Solutions Limited, Inventure Mobile Limited (Trading as Tala), Jumo Kenya Limited, Letshego Kenya Ltd, MFS Technologies Limited, M-Kopa Loan Kenya Limited, Mwanzo Credit Limited, Mycredit Limited.
MyWagepay Limited, Natal Tech Company Limited, Ngao Credit Limited, Pezesha Africa Limited, Rewot Ciro Limited, Sevi Innovation Limited, Sokohela Limited, Tenakata Enterprises Limited, Umoja Fanisi Limited and Zanifu Limited-Nairobi have also joined.
While a number of non-deposit-taking Saccos are on the list of those who have sought licenses from the CBK, they still need to receive a permit.
While Saccos have been lending to members based on the volume of their deposits, other digital lenders have other more sophisticated ways of looking at a client before advancing any loan products. The latest such player is the state-run Hustler Fund, whose lending is based on other considerations, and one only needs a mobile phone wallet.
These DCP Regulations only apply to entities carrying out digital lending services through digital channels such as computers, mobile phones, the internet and apps.
However, these regulations do not apply to deposit-taking institutions such as Saccos, Banks and Microfinance Institutions.
This paradigm shift in the lending business is now pushing Saccos-previously dominant at the low end of the income pyramid, to invest heavily in technology and mobile phone applications.
CBK stated that it had received 381 applications since March 2022 and has worked closely with the applicants in reviewing their applications. Additionally, CBK has engaged other regulators and agencies pertinent to the licensing process, including the Office of the Data Protection Commissioner.
The focus of the engagements has been inter alia on business models, consumer protection and fitness and propriety of proposed shareholders, directors, and management. This is to ensure adherence to the relevant laws and, importantly, that the interests of customers are safeguarded.
The licensing and oversight of DCPs by CBK were precipitated by concerns raised by the public about the predatory practices of the unregulated DCPs, particularly their high cost, unethical debt collection practices, and the abuse of personal information.
To ensure adequate consumer protection, CBK has created a portal, [email protected], where reports on unregulated DCPs can be sent through.
Stiff DCP regulations require all digital lenders to obtain permits from CBK after furnishing the regulators with details such as the source of funds, shareholding structure, and a fitness test for directors, CEOs, senior management staff, and any major shareholder(s).
Licensing of more digital credit providers comes against the background of a 31st January 2023 deadline issued by Google, which warned that it would lock out all unlicensed digital lenders from its play store and other android devices. Google insists that all digital loan Apps in Kenya must provide a license issued by CBK. Those who fail to do so will have their Apps deleted from the Play Store as required by the CBK amendment Act 2021 on digital lending in Kenya.
