The Central Bank of Kenya (CBK) says it will not cap interest rates charged by digital lenders but expects them to price their loans appropriately.
“If you mean ourselves having sort of caps and things like that obviously the answer is no. We are not going into that part of the world again, we already explained why,” said Dr Patrick Njoroge in response to a question on whether the regulator would regulate the lenders.
“What we do and I have been saying on the banking side is ensuring the pricing is appropriate in many ways and I think you have already seen what we have done with the banks. We have talked about the pricing principles that we have, things related to how they should treat customers,” Dr Njoroge said.
“So I think that’s really a good model to start with. It doesn’t mean that it will be translated word for word but definitely, the direction is clear.”
“Let us wait and see. We haven’t yet got the authority to regulate so whatever we say today, speculation, so let’s wait for the final, the final authority and then we can have the conversation then.”
Through the Central Bank of Kenya (Amendment) Bill, 2020, the regulator seeks to amend it to supervise and regulate digital financial products and services. This is aimed at protecting customers from unregulated mobile lenders.
The bill has gone through its first reading in the National Assembly on February 25, 2021.
A study ‘Understanding Consumer Protection Risks Faced by Kenyan Digital Finance Users’ by the Competition Authority of Kenya (CAK) and Innovations for Poverty Action (IPA) found out that many borrowers do not consider the costs of loan products and take loans from multiple lenders.
“Pricing of digital loans was not an important factor to borrowers in choosing the lender. The two main considerations are speed of disbursement and ease of repayment,” says the study.
“(Only) 27 per cent of digital borrowers were aware of the fees and costs of other digital loan providers in the market.”
The project targeted customers of digital credit providers who have taken at least one loan from a regulated or unregulated lender between January 2019 and March 2020.