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Mobile lenders mull sharing clients’ data after CRB listing ban

By John Otini
Thursday, October 15th, 2020
Mobile phone technology.
In summary

Digital Lenders Association of Kenya (DLAK) is preparing to share  data on clients after they were barred from forwarding names of defaulters to credit reference bureaus.

Central Bank barred unregulated digital mobile lenders from submitting or getting data from credit reference bureaus (CRBs) following public outcry over widespread misuse of private information.

The lenders said they needed to establish own credit reference system to know the number of loans a borrower has taken from the other players to cut risk exposure.

“We definitely see an opportunity to share information amongst the lenders and that is an opportunity that we are exploring as the digital lenders as DLAK,” said Tala general manager Ivan Mbowa said

“As a lender you need to know the extent to which your client is over-borrowed,” he said.

Mbowa said there are Kenyans who have over 12 loan apps on their phones and hence the need to monitor the borrowers.

“By blocking digital apps from the credit reference bureaus you are ensuring that all lenders including banks are flying in the dark,” he said, adding that it means that our borrowers who have a good credit history are wasted.

An estimated 337 unregulated digital mobile lenders have been barred from forwarding the names of loan defaulters to credit reference bureaus.

This means that the number of firms allowed to blacklist defaulters with the bureaus has dropped to 2,254 in September from 2,332 in May last year. 

Massive funding

Key players in the digital lending space include, Tala, Branch, Zenka and Okash among others which have attracted massive funding from investors to dispense billions in loans annually.

A recent study by Kenya Bankers Association showed that digital lenders such as Pesa na Pesa charge interest of up to 38.8 per cent, Pesa Pata 30.4 per cent and Kopa Cash 15.3 percent.

These monthly interest rates are way above the average cost of regulated banking credit that KBA puts at 11 per cent.

Tala and Branch and other top players in the mobile digital lending market, offer interest rates of 12.7 per cent and 7.6 per cent respectively for loan borrowed over one month.

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