Digital lenders allowed to list Kenyans with CRBs in law change

Digital lenders will be allowed to access and list Kenyans with credit reference bureaus (CRBs) under the proposed ‘digital lenders’ law.

In recommendations to Parliament, the National Assembly Committee on Finance and National Planning has cleared digital lenders to access the credit information sharing (CIS) system in their report considering the 2021 Central Bank (Amendment) Bill.

This follows lobbying by not just the coalition of digital lenders led by the Digital Lenders Association of Kenya (DLAK) but also the Central Bank of Kenya (CBK).

“The Committee agreed to the proposal so that the digital lenders are allowed to disclose any positive or negative information of its customers to the licensed credit reference bureaus. The information so provided must be, only that which is necessary for the discharge of the functions of the digital lenders and the licensed credit reference bureaus,” said the Gladys Wanga led Committee.

DLAK in sittings with the Finance Committee had pushed for the return of digital lenders to the CIS system highlighting the role of CRBs in credit issuance.

“Many Kenyans lost the credit history reports that would enable them to obtain credit at lower risk-adjusted rates,” DLAK told the Committee.

Digital lenders were ousted from listing Kenyans with CRBs in April last year with the CBK citing the abuse of the credit sharing platform by the players.

DLAK has been pushing for the reversal of the listing freeze sighting opaqueness in credit issuance.

From the lock out, DLAK says the value of loans disbursed monthly halved to just Ksh.2 billion on the backdrop of the freeze.

The lifting of the ban is likely to see the number of Kenyans listed with CRBs spike on the back of elevated loan defaults covering the pandemic period.

For instance, data from CRBs shows the number of ‘blacklisted’ Kenyans crossed the three million mark at the end of last year from the pandemic driven defaults.

The National Assembly Finance and National Planning Committee has allowed the CBK to license the digital lenders while allowing the reserve bank to set parameters on the pricing of digital loans.

Nevertheless, digital lenders will not be subjected to capital adequacy and minimum liquidity requirements with the Committee noting that they pose no risk to public funds.

The CBK is expected to collaborate with the Communication Authority of Kenya (CA) and the Office of the Data Protection Commissioner to audit the digital lenders compliance to data privacy.

Further, the CBK is expected to keep a public registry of digital lenders.

Digital lenders will have six months to comply with new regulations while the CBK has been granted a window of 60 days to respond to license applications.

The National Assembly is expected to pass the digital lenders ‘regulation bill’ in the coming weeks.

At present, there is no legal framework governing the digital borrowing framework which has allowed some players in the sector to exploit Kenyans to include high interest rate on loans and punitive debt collection measures.