CBK plans expanded role to police all credit providers

Kamau Thugge, CBK Governor

Central Bank Governor Dr Kamau Thugge before the Departmental Committee on Finance and National Planning at Continental House Nairobi on October 24, 2023. 

Photo credit: Dennis Onsongo | Nation Media Group

The Central Bank of Kenya (CBK) wants an expanded mandate to oversee all credit providers, pushing its grip beyond commercial banks and microfinance institutions.

The apex bank said it is pushing for the larger role noting that not all credit providers fall under the ambit of regulated entities at present.

CBK Governor Kamau Thugge said he has made submissions to the National Assembly Finance and National Planning Committee seeking to move changes to the CBK Act through future legislation including a Miscellaneous Amendment Act.

“We have submitted some amendments touching on digital credit providers’ clauses on the CBK Act to move away from digital credit to credit because a lot of the businesses that provide credit are not always digital,” he said in an interview.

The new licensees who have been waiting for the regulator’s nod since late 2022 include car-log book loans provider Mogo Auto Limited, Ismuk Credit Limited, Mint Credit Limited, Payablu Credit Limited, Progressive Credit Limited, Stride Credit Limited, and ED Partners Africa Limited.

The CBK has received more than 550 applications for licenses since March 2022 and notes that it has been working closely with the applicants in reviewing their applications.

The approval process has however been lengthy as the CBK undertakes intense interrogation of the applicants’ business models, consumer protection, and fitness and propriety of proposed shareholders, directors, and management.

Digital lenders have sought CBK’s guidance on the documents required to unlock the more than 400 pending applications. CBK has only approved 10.5 percent of DCPs who applied for licenses or 58 entities out of more than 550 applications submitted.

Applications by firms seeking to enter the digital lending space have increased to more than 550 from 480 previously as of March when the banking sector regulator handed 19 new DCPs licenses. CBK gazetted the Digital Credit Providers regulations in 2022 requiring all digital lenders to apply for licenses before September of the same year.

DCPs are required to make disclosures on interest rates charged, and terms of credit to borrowers and sign off on a provision barring them from sharing information of loan defaulters with third parties.

The regulation of DCPs by the CBK seeks to bring sanity into an industry previously plagued by predatory lending and debt shaming.

Public concerns about exorbitant costs, unethical debt collection practices, and the abuse of personal information preempted the regulation of the entities.

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