Digital lenders are seeking Central Bank of Kenya (CBK) guidance on the documents required to unlock more than 400 applications awaiting clearance for award of licences.
The Digital Financial Services Association of Kenya (DFSAK), an umbrella body for digital loan providers, says while it welcomes the recent award of 19 additional licenses, clear guidance from the CBK on details of the pre-requisite documents will help speed up the process.
CBK has received 480 applications for digital lending licenses since March 2022 but has so far cleared 51, keeping 429 waiting over what it terms as “pending documentation.”
DFSAK is now seeking further guidance, saying that many of the challenges faced by the digital credit providers (DCPs) in meeting regulatory standards for clearance are because they are coming under regulation for the first time and lack clarity on what to submit.
“In light of this, DFSAK urges CBK to provide guidance notes, similar to those issued by the Office of the Data Protection Commissioner (in December), to assist DCPs in enhancing the quality of their submissions,” said Kevin Mutiso, the chairman of DFSAK.
“This proactive measure would streamline the review process and improve overall compliance within the sector.”
The latest award of 19 licensing comes nearly a year after the previous batch of 12, and close to two years since the CBK required mandatory registration of DCPs, a move aimed at supervising the sector’s operations.
Applications from firms seeking to enter the digital lending space increased to 480 from the 401 CBK reported at the time of the last licensing in March last year, meaning that more digital lenders are submitting applications.
Mr Mutiso says its members have had to evolve with the CBK (Digital Credit Providers) Regulations, 2022 which among other things, barred them from listing defaulters of below Sh1,000.
“DFSAK recognises the transformative impact of digital financial services on customers in Kenya and remains steadfast in its mission to ensure a professionally managed industry that serves the best interests of all stakeholders,” he said.
Digital loans have gained popularity due to their ease of application for borrowers seeking quick cash for emergencies and survival without requiring collateral.
CBK started regulating this space to remove the legal lacuna that had attracted public outcry about the pricing of digital loans and the extent that lenders could go to recover their money from defaulters.
Many customers had raised concerns about predatory practices, in particular the high cost, unethical debt practice and abuse of personal information.
Digital lenders are currently required to disclose to customers all the charges and fees, interest rates and total cost of credit. They are also not allowed to arbitrarily vary the rates but have to seek CBK clearance.
