Another digital lender buys Kenyan microfinance bank
Kenyan microfinance banks have become a target of foreign fintech companies seeking to overcome regulatory challenges that have hit digital lenders.
Umba Inc, a US-based digital bank which operates a non-deposit-taking credit business in Kenya through its subsidiary UMBA Technology Ltd, has become the second fintech to acquire a majority share of a Kenyan microfinance bank as the new digital lending law kicks in. It has acquired a 66.06 per cent stake in c Ltd, effective July, 1 following approval by Central Bank of Kenya (CBK) on May 23, 2022.
In February, Branch International Ltd became the first mobile digital lender to acquire a majority stake in a banking institution more than a month after the law regulating digital lenders came into force.
A statement by CBK said the investment by UMBA will strengthen Daraja MFB’s business model, adding that will particularly support the digitisation of Daraja MFB as it moves to providing ‘anytime anywhere’ services to its customers.
Banking sector
“This is aligned to CBK’s vision of a microfinance banking sector that works for and with Kenya,” it said.
Daraja, which was licensed in 2015 and whose main customers are small and medium enterprises, has a market share of below 1 per cent of the microfinance banking sector in Kenya. CBK gazetted the Digital Credit Providers regulations, 2022 that will require all digital lenders to apply for licences from the banking regulator before September.
The lenders will from September apply to CBK for approval of interest rates on their loans, disclose all terms of their credit to borrowers and have also been barred from sharing information of loan defaulters with third parties.
