Rein in banks too over mobile loans, CBK told

By Kamau Macharia 

Central Bank of Kenya Governor Patrick Njoroge

MPs now want the Central Bank of Kenya (CBK) to regulate banks’ mobile loans that they say are disproportionately more expensive than their conventional products.  

This is the latest push to bring mobile lending under the regulatory purview.

The banking industry regulator is already gearing up to start policing the hitherto unregulated digital lenders that have been criticised for predatory lending through the CBK Amendment Bill, 2020.

Some have even been cited for debt shaming mechanisms to recover loans.

Digital lending apps by local commercial banks, including products such as Fuliza, Mshwari and KCB M-Pesa, account for a substantial chunk of mobile loans.

While the companies offering the products are regulated, the law restricts CBK to regulating traditional banking products. The Senate Committee on Finance and Budget during a virtual meeting with CBK Governor Patrick Njoroge yesterday said banks’ mobile loan products too, need to be regulated alongside those of other digital lenders that have had a free hand in pricing their loans. 

Aaron Cheruiyot, a member of the committee and the Kericho Senator, said banks are also guilty of charging high interest rates or facilitation fees, which in some instances, are at par with those charged by the unregulated players.

“Your team has not done justice by not giving statistics on mainstream platforms. It is something that should be of big concern. The loan sharks (digital lenders) need to be looked into, but there is also need to rein in the big corporations,” said Senator Chruiyot.

Senator Cheruiyot said commercial banks when lending on their mobile platforms charge as much as 80 per cent interest when the monthly charges are annualised. This is compared to interest rates of between nine and 13 per cent for normal loans. Governor Njoroge urged the National Assembly to pass the CBK (Amendment) Bill, 2020 to give the regulator more teeth in overseeing the digital lenders.

“The unregulated digital lenders are a big concern, and we have a work plan on how to deal with them and we need to accelerate this,” he said.

Dr Njoroge also acknowledged that there is a challenge with banks using digital platforms in ways that are not consistent with the traditional mechanisms but added that CBK is looking into this as well.

“The culture among banks has to change so that when they look at a customer, they are able to see a customer and not someone to take advantage of,” he said.

Bungoma Senator Moses Wetangula said inaction on the part of CBK would drive more Kenyans to turn to shylocks.

“They are fleecing Kenyans, charging interest on loans at times at 100 per cent, ” he said.