Unemployed Kenyans to be Blocked From Loan Apps

A user browsing through a smartphone for news.
A user browsing through a smartphone for news.
Simon Kiragu

Unemployed Kenyans and students may be denied loans after digital lenders put in place measures prior to a probe by Parliament as reported by Daily Nation on Saturday, March 14.

Digital Lenders Association of Kenya (DLAK) Spokesperson Kevin Mutiso stated that the companies are developing strategies to lock out those who don't meet new tough requirements that are in the works. The lenders are looking for ways to cut back on the number of loans defaulted.

“We have started working with bodies like Kenya Revenue Authority, National Registration Bureau and Credit Reference Bureau to get valuable information about our clients. This will help us stop lending to students and those who don’t have the capacity to repay,” Mutiso stated in an interview with the publication.

A photo of members of the Digital Lenders Association of Kenya (DLAK).
Members of the Digital Lenders Association of Kenya (DLAK).
Citizen Digital

He revealed that one of the lending apps which he is in charge of had refrained from lending to persons under the age of 25.

Mutiso added that the association was working to curb multiple lending by Kenyans across, a number of apps to reduce the chances and cases of default.

“Under this initiative, if a person has borrowed, say Ksh 20,000 from one app, they will be barred from taking another loan from any other digital lender before the previous loan is repaid in full.

"We want to instil discipline among our customers," Mutiso stated.

On Wednesday, March 4, National Assembly Speaker Justine Muturi sanctioned a probe into the loan apps in a bid to curb irregular lending.

Mathare Member of Parliament Antony Oluoch had petitioned the National Assembly Committee on Finance to investigate alleged "illegal and exploitative tendencies" by the loan apps.

Oluoch asked that the Central Bank of Kenya and the Communication Authority of Kenya to regulate lending apps in the country.

“Digital borrowing has become a social menace responsible for suicides, divorce, family breakups and increased listing of loan defaulters by the Credit Reference Bureau (CRB),” Oluoch's petition read in part.

A statistical report by the Kenya National Bureau of Statistics (KNBS) revealed that there were more than 50 operational mobile lending apps in the country with over 19 million Kenyans actively borrowing.

The report indicated that over 40 per cent of borrowers had up to 10 loan apps installed.

Oluoch argued that the loan apps had sunk Kenyans deep in debt, pushing some to commit suicide.

The lawmaker argued that some of the lenders had been charging exploitative interest rates at 19.1 per cent as opposed to the 13 per cent recommended by CBK. This can be because the apps are not recognised as financial institutions and supervised by CBK under the Banking Act and thus are not bound by 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," Oluoch argued.

Mutiso, however, stated that the association was open to regulation by an independent regulator.

He asserted that they had talks with CBK to ensure professionalism in the sector.

“We are open to regulation. We will collaborate with CBK, Parliament and all other relevant bodies to ensure proper laws and regulations are put in place to guide the sub-sector,” Mutiso stated.

Stock image of Kenyans crossing a street in Nairobi.
Stock image of Kenyans crossing a street in Nairobi.
Simon Kiragu
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