Editorials

Pass Bill on mobile loans

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MPs during a session at Parliament chambers. PHOTO | FILE

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Summary

  • The proposed law giving Central Bank of Kenya (CBK) powers to control interest rates of digital lenders is welcome given the growing popularity of these micro loans.
  • The parliamentary committee on Finance and National Planning approved the Central Bank Amendment Bill 2021 and added a clause that gives the CBK powers to price interest rates for digital loans.

The proposed law giving Central Bank of Kenya (CBK) powers to control interest rates of digital lenders is welcome given the growing popularity of these micro loans.

The parliamentary committee on Finance and National Planning approved the Central Bank Amendment Bill 2021 and added a clause that gives the CBK powers to price interest rates for digital loans.

The proposed law will also see the regulator control their products, management, and sharing of borrower information.

Providing parameters for digital credit providers to set the cost of credit is crucial given the steep digital lending rates that have plunged many borrowers into debt traps.

Unregulated micro-lenders have saddled borrowers with high interest rates, which rise up to 520 percent when annualised.

Regulating the parameters for pricing these loans will therefore be a win for both the digital lenders and borrowers in order to achieve sustainable financing. Digital lenders stand to make better models for lending and also rein in inefficiencies to ensure they can bring down rates to levels that lower defaults.