On 7th December 2021, the Central Bank of Kenya Act was published to regulate digital lending.
In recent years, Kenyans have enjoyed improved access to credit due to the introduction of digital lending in the financial market by the unregulated digital lending industry. However, this venture which was initially praised for its convenience and easy process has come under severe criticism by its users due to the high-interest rates imposed unethical debt collection practices and abuse of personal information.
The new Central Bank of Kenya Act regulates the digital lending industry and serves to ensure that the market is fair, access is non-discriminatory and that users will benefit from enhanced protection.
One of the provisions of the act is that regulations as to the practical aspects are required to be published by end of March 2022.
Here are some of the highlights of the new Act and the proposals of the draft regulations:
- It will be a requirement to have a licence to engage in the business of digital lending. The licence will be issued by the Central Bank of Kenya.
- A proposed licence application fee of KES 5000 will be charged. The annual digital licence renewal fee will be KES 20 000.
- The licence will be non-transferrable. It can be revoked or suspended by the Central Bank of Kenya at any time.
- Although no set lending rate will be imposed for digital lending, the Central Bank of Kenya will set a pricing parameter for loans.
- Draft regulations on consumer protection and dispute resolution mechanism are also being considered.
It is open to members of the public and/or digital credit providers to provide suggestions through written submissions about the draft regulations until 21 January 2022.
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