CBK licensing unlocks funding nightmare for digital lenders


The Central Bank of Kenya in Nairobi. FILE PHOTO | NMG

The licensing of digital credit providers by the Central Bank of Kenya (CBK) has opened the floodgates of new funding to the non-deposit taking entities.

CBK’s greenlight to 12 additional digital lenders at the end of January has, for instance, enabled Mycredit Limited to tap Sh325 million from Oiko Credit in a deal announced on February 1 with the proceeds expected to spur the lender’s medium-term lending programme to small and medium enterprises.

“The funding from Oiko allows us to start giving medium-term loans to at least 1,000 SMEs in the next financial year,” said MyCredit Limited Managing Director Wangaruro Mbira.

Business Daily has established that more funding is expected to stream to the recently licensed digital credit providers with M-Kopa Loan Kenya Limited, for instance, expected to raise more funding according to a source who sought anonymity. 

The fintech platform, which provides connected financing and digital financial services to unbanked customers has been among the top recipients of funding from partners and investors in the recent past.

M-Kopa Loan Kenya sealed a Sh9.4 billion ($75 million) equity round in March last year with the injection bringing M-Kopa’s total equity funding to Sh23.8 billion ($190 million) to support the fintech’s expansion including adding to its hubs in Kenya, Uganda and Nigeria.

On January 30, the CBK issued 12 additional licensing to digital lenders including Inventure Mobile Limited (Tala), Jumo Kenya Limited, Letshego Kenya Limited, MFS Technologies Limited, Natal Tech Company Limited, Ngao Credit Limited, Pezesha Africa Limited, Tenekata Enterprises Limited, Umoja Fanisi Limited and Zanifu Limited.

This brought the number of licensed entities in the space to 22, after the grant of licenses to 10 players in September last year including Ceres Tech Limited, Getcash Capital Limited (Flash Credit Africa), Jijenge Credit Limited, Kweli Smart Solutions Limited, Mwanzo Credit Limited, MyWagepay Limited, Rewot Ciro Limited, Sevi Innovation Limited and SokoHela Limited.

The recent grant of permits to digital credit providers has served to dissipate fears among players especially existing entities who missed out entirely from the list of initial licensees which largely featured new players in the industry.

The lengthy delay to secondary approvals had caused jitters to the players who lamented struggles in obtaining fresh funds to investors who were demanding CBK certification before disbursing money.

The jitters led to digital lending executives fearing a potential cash-crunch even as their platforms were blacklisted to platforms such as the Google Playstore.

Delays in the issuance of digital credit providers licensing was largely attributed to the wide range of documentation required by the CBK including a list of directors and funding sources.

CBK’s engagement with other regulators and agencies such as the Office of the Data Protection Commissioner is also attributable to the lengthy licensing process.

“The focus of the engagements has been inter alia on business models, consumer protection and fitness and propriety of proposed shareholders, directors and managers. This is to ensure adherence to relevant laws and importantly that the interests of customers are safeguarded. We acknowledge the efforts of the applicants and support of other regulators and agencies in this process,” the CBK stated.

“Other applicants are at different stages in the process, largely awaiting the submission of requisite documentation.”

Concerns including exorbitant credit costs, unethical debt collection practices, and abuse of personal information served to push digital credit providers to the ambits of the banking sector regulator.

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