Digital lenders stop loans below Sh1,000 on CBK rule


Board Chair of the Digital Lenders Association of Kenya (DLAK), Kevin Mutiso speaks at a past event on September 12, 2023, at Movenpick Hotel in Nairobi. PHOTO | BILLY OGADA | NMG

Digital lenders have raised the minimum loan value to above Sh1,000 on the Central Bank of Kenya (CBK) regulations that barred them from negatively listing defaulters on small ticket mobile phone credit.

This is after the lenders were spooked by default rates on loans below Sh1,000, making them to effect the review to be able to list defaulters with the credit reference bureaus (CRBs).

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Digital Financial Services Association of Kenya (DFSAK) says its members have had to evolve with the CBK (Digital Credit Providers) Regulations, 2022 which, among other things, barred them from listing defaulters on below Sh1,000 debt.

“The law is very clear that amounts below Sh1,000 cannot be reported so the limit for most of our loans is now closer to Sh2,000. We are very strict on the type of customers we give loans to nowadays,” said Kevin Mutiso, chairperson at DFSAK, on phone.

“Customers are still similar but what we have done is reduce the probability for default. So those who used to borrow say Sh500 on our platform now can’t.”

The CBK had by March licensed 32 digital credit providers, binding them to the regulations that also bar them from using obscene or profane language or making “unauthorised or unsolicited calls or messages to a customer’s contacts” in the name of recovering defaulted loans.

DFSAK, formerly the Digital Lenders Association of Kenya, previously found that 55.5 percent of its borrowers use the loan amount to boost the working capital for small businesses while 24.8 percent use it to cover unexpected expenses. Another 13 percent use it to pay school fees.

Read: Ten more digital lenders get the go ahead from regulator

Digital lenders have been keen to shield themselves from high default rates, having seen this trend from April 2020 to part of last year when the CBK blocked them from listing defaulters with CRBs due to the misuse of the credit information platform.

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