online lending
Mobile-based online lending firms should be regulated to prevent flow of illicit cash into the country's financial system. FILE PHOTO | NMG 

The statement by the Central Bank of Kenya (CBK) governor that mobile-based online lending firms should be regulated to prevent flow of illicit cash into the country's financial system is worth debating before Kenya throws out the baby with the bath water.

As a default position, the regulator should move with caution as millions of Kenyans rely on these platforms to access credit for emergencies and in some cases, to finance their legitimate businesses. As such, regulation should be done without strangling the lenders out of business.

The rise of credit-only mobile lending institutions such as Tala, Branch and Okash is an indication that they have filled a gap left by mainstream lenders.

CBK governor Patrick Njoroge on Wednesday told parliamentarians that regulators are concerned about the source of funds that these institutions are lending to the public since they do not take in deposits. This is a legitimate concern.

Any move to regulate the sector will be a step in the right direction and should inspire confidence in players that something is being done to eliminate illegal dealings that might destroy the country’s financial system.


The lenders also have a responsibility to ensure that they avoid dealings that border on illegality or irregularity, bearing in mind that they play an important role in the economy. It would also help if they were more transparent about the sources of their funding.

A section of borrowers has narrated on social media harrowing tales of how some of the creditors openly breach the law while trying to collect money from defaulters. Allegations that some of the lenders also share private data with third parties also need to be investigated.

It is in the interest of these firms to operate within the law -- although currently they are unregulated -- to maintain their integrity and earn customer trust.

Similarly, the Betting Control and Licensing Board (BCLB) should not take actions that will kick betting firms out of business. Gambling and betting, like other businesses, are legal in the country and should be regulated adequately, not killed altogether. It should not be lost on the regulators that digital lending and betting firms pay billions of shillings in taxes and employ thousands of Kenyans. Therefore, forward-looking policies should be debated, formulated and implemented to protect all the stakeholders.