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Legislators to investigate digital mobile lenders’ conduct

By Christopher Owuor
Thursday, March 12th, 2020
Mobile money. Photo/File
In summary
    • According to Mathare MP Antony Aluoch, a number of people have been lured into over-borrowing with some resorting to suicide after being overwhelmed by repayment amounts. 
    • The legislator argued that online lenders are trapping borrowers into unnecessary borrowing and a vicious cycle of expensive loans by raising limits upon repayment of the initial loan.
    • According to the petition before Parliament, digital borrowing has become a social menace responsible for family breakup and increased listing of loan defaulters by Credit Reference Bureaus (CRBs).

Mercy Mwai @wangumarci

National Assembly committee on Finance and Planning is expected to commence investigations into mobile money lending platforms with a view to stop unregulated money lending.

The move came after Speaker Justin Muturi referred Mathare MP Antony Oluoch’s concerns of unregulated lending in the country to the committee chaired by Joseph Limo.

Platforms that will be investigated include Tala, Mshwari, Fuliza, KCB M-Pesa, Branch, Shika, iPesa, Berry, Okash and Zenka.

Kenya National Bureau of Statistics (KNBS) shows there are currently more than 50 mobile and online credit providers in Kenya with more than 19 million Kenyans actively borrowing and 40 per cent of the borrowers having multiple (up to 10) loan Apps.

Operations audit

“Let this matter be referred to the committee on Finance and let them table a report to this House,” said Muturi.

In a petition, Oluoch demanded that apart from stopping lending, CBK in conjunction with the Communications Authority of Kenya should audit the operations of the digital lending platforms including asking for provision of full disclosure on involved up front charges and applicable interests.

He regretted that through unregulated loans advanced through mobile phones, a number of people have been lured into over-borrowing with some resorting to suicide after being overwhelmed.

Further Oluoch claimed that the lending Apps have continued to lure and trap borrowers in to unnecessary borrowing and a vicious cycle of expensive loans raising limit upon repayment of the initial loan, easing their accessibility on internet making it easier for jobless youths to borrow for betting or to pay credit instead of investments.

Family breakup

“Digital borrowing has become a social menace responsible for suicides, divorce, family breakup and increased listing of loan defaulters by Credit Reference Bureaus (CRBs),” he said.

He added: “I pray that National Assembly, through Committee on Finance and National Planning, investigates the operations of all mobile money lending platforms in the country with a view to stopping unregulated money lending and subjecting all non-compliant mobile lenders to applicable regulations.”

In his petition, Oluoch cited a recent report by CRB which shows that more than 2.7 million Kenyans are already blacklisted after failing to repay their loans.

The mobile lending platforms, he said, have been charging exploitative interest rate of 19.1 per cent instead of the 13 per cent recommended by the CBK.  

Because they are not recognised as financial institutions and supervised by CBK under the Banking Act, they operate bereft of regulation, including tax obligations

“Due to lack of proper regulation, mobile money lenders infringe on clients’ right to privacy by accessing customers’ contacts to call friends and family about the borrowers’ debt status.”

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