The Parliament’s Finance and National Planning Committee approved the Central Bank of Kenya Bill 2021 (Amendment) and added a clause that gives the CBK the power to set interest rates on digital loans.
Highlights of the proposed regulations include cutting high digital lending rates and red players using debt shame as a way to collect payments.
Additionally, if the bill is approved, CBK will also monitor the products offered by digital lenders as well as the borrower’s data.
According to the Digital Lenders Association of Kenya (DLAK), the proposed law will help curb red players in the industry who have tarnished its reputation.
âThis is good news for the industry. This will see the red players tamed and, more importantly, the CBK will provide guidance that will see appropriate pricing in the industry, âsaid Kevin Mutiso, President of DLAK.
Failure to comply with the new regulations, if passed, will result in lawsuits against lenders.
âThe red actors will have a hard time functioning. If they break the regulations, the company and its directors will be brought to justice, fined and some could lose their jobs as well, âadded Mutiso.
The bill removed any minimum capital requirement from the bill because fintech lenders do not accept deposits.
The Central Bank will also have up to 30 days from receipt of application documents to either license a fintech or notify it of the denial of approval.
The committee agreed to remove the provision giving CBK the power to approve business models, as this will create unnecessary hurdles and digital lenders must have space to innovate.
“When the law is passed, many lenders will focus on a specific sector when it comes to lending …” added Mutiso.
The regulation comes at a time when some digital lenders have been accused of unethical debt collection tactics and have also curbed high rates on digital loans that have plunged many borrowers into a debt trap as well as lending. predators.
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