Equity boss calls for regulation of mobile lending apps

The government has been called on to regulate micro lending platforms that have gained popularity in the country.

Equity Bank is among lenders pushing for the regulation of mobile based lenders, in a move aimed at protecting borrowers from high exposure rates.

Mobile lending apps have especially become popular after the government moved to cap interest rates, locking perceived risky borrowers out of the formal credit market.

Equity Group chief executive officer James Mwangi on Thursday said small businesses and individual borrowers had been hardest hit by the cap, resorting to the unsecured but equally expensive micro lenders which are increasingly becoming a cause for concern.

“If there was anybody who needed protection it’s not me and you we can protect ourselves, it’s those at the bottom of the pyramid who have very limited choices,” Mr Mwangi said.

Credit growth to the private sector has shrunk by nearly 20 percent and many would be borrowers haven’t been able to access credit over that period industry data shows.

The National Treasury and the Central Bank of Kenya have both voiced their concern of the growth of the unregulated mobile lenders.

This has seen the banking regulator warn of predatory lending and the need to ensure borrowers are informed and protected.

“This really what we talked about. The SME’s are really hurting and the only option they have is to go to the shylocks and you know how that becomes a major social issue,” a seemingly concerned CBK governor-Patrick Njoroge told journalists earlier this month.

Finserve Africa, a subsidiary of Equity Group, has said regulation would create a level playing field for both conventional lenders and Fintech lenders to operate.

Finserve Africa managing director Jack Ngare said regulation would also push for better innovation in the sector.

“On one side you have traditional players who have a regulation on interest capping. On the other you have masses moving towards the convenience of digital lenders to access this credit. For sure there should be a standard playing field across the board,” Mr Ngare said.

Mr Mwangi said there was need to ensure the credit market was not tilted in favor of unregulated players.

“If you are applying regulation, apply uniformly what the regulation did was to skew the market and at worst throw low income Kenyans under the bus,” he stressed.

Story by Patrick Igunza & Kepha Muiruri