The Central Bank of Kenya has been shaken, as an unprecedented turn of events forced it to evaluate its controls.
This was precipitated by the revelation that a middle-aged man had taken his life, following constant harassment and public shaming by one of the digital lending apps that have recently flooded the market.
The unfortunate death sparked a conversation on digital lending platforms and the laws that regulate them.
According to a report by Daily Nation on February 18, 2020, CBK Deputy Governor Sheila M'Mbijjewe provided that the case was reported to the regulator by the victim's family.
“In November last year (2019), a lady came to the Central Bank to explain to us that her husband had committed suicide after getting involved with one of these lenders."
The suicide was fueled by the tactics that digital lenders use to get back their money from debtors.
The tactics, which have been described as cruel and reminiscent of old-time long sharks have been said to hold no regard for good faith or courtesy.
One of the tactics these digital lenders have employed includes sending an SMS to every contact on a user's phone to alert them that the person is in default.
“What this lender did is that when her husband was unable to pay the debt through the contact list of her husband, [the lender] started sending messages to all of them, including his mother, his grandmother and his aunt,” said Sheila M’Mbijjewe referring to one of the factors that drove the affected man to suicide.
Other apps chose to text or call the debtor every hour until the pending sums are cleared, a situation that borders on harassment.
Following the revelations, Kenyans came out in droves to complain about the tactics that lenders use to get money from the debtors.
Kenyans are learning that with financial inclusion, comes financial risk.
— Bloomberg Originals (@bbgoriginals) February 17, 2020
Here's how microfinancing apps like Tala have trapped millions of Kenyans in cycles of debt and default. Read more via @BW: https://t.co/WcgDCDo5V0 pic.twitter.com/X0yUvuS591
A recent video published by Bloomberg on February 18, 2020, highlighted the status quo that has contributed to the growth of unregulated loan apps.
“Currently, one in 10 Kenyans have defaulted on a digital loan with some borrowing from one app to pay for another.”
The interest rates charged by these lenders have been reported to be in the ballpark of 132% for certain digital lenders and above 150% for others.
This has resulted in Kenyans finding themselves in a vicious debt track.
The CBK Deputy Governor vowed on February 13, 2020 to prepare a law that will cover digital mobile lenders to curb the exorbitant interest rates as well as curb harassment and public shaming by the digital lending apps that have gone rogue.
