CBK Moves to List Defaulters for Digital Loan Apps

  • CBK Governor Patrick Njoroge speaking during a press conference on March 30, 2021
    CBK Governor Patrick Njoroge speaking during a press conference on March 30, 2021
  • The Central Bank of Kenya (CBK) has sought the return of the Credit Reference Bureau (CRB) listing for digital mobile lenders.

    Through the Central Bank of Kenya (Amendment) Bill 2021, CBK governor Patrick Njoroge advocated for digital loan apps to resume filing their reports with CRBs.

    "The Central Bank Amendment Bill 2021 should empower digital lenders to share credit information," Njoroge stated. 

    Should the MPs in the National Assembly approve the bill, all digital mobile lenders will be expected to share details of their credit information.

    Central Bank of Kenya (CBK) building in Nairobi.
    A file image of the Central Bank of Kenya (CBK) building in Nairobi.
    Simon Kiragu

    The bill also gives the unregulated mobile lenders six months to become compliant with the stated laws in order to receive a license from the regulator.  

    Njoroge affirmed that the move would curb financial malpractices such as money laundering. He added that digital lenders were accused of using belligerent tactics by threatening borrowers with negative listing. 

    This, according to Njoroge, has also resulted in an erroneous listing for a section of Kenyans, who have faced dire consequences when seeking a loan. 

    A negative listing usually entails a borrower being barred from taking a loan from another credit provider until the current debt is settled. 

    This serves as a huge blow for those who have been falsely added to the listing - as they suffer grievous harm. 

    The CBK boss affirmed that, once the digital lenders become regulated, they will be under strict supervision in order to ensure that the entities follow the due procedure in all financial transactions. 

    Initially, CBK had barred mobile lenders from forwarding names of loan defaulters to CRBs. The regulator had also stopped the blacklisting of borrowers owing less than Ksh1,000 over widespread misuse of credit information sharing mechanism (CIS). 

    "The withdrawal is in response to numerous public complaints over misuse of the CIS (credit information sharing) by unregulated digital and credit-only lenders, and particularly their poor responsiveness to customer complaints,” Njoroge pointed out. 

    Currently, data from the CBK shows that the number of digital loan borrowers has increased from 200,000 in 2016 to 2 million in 2019- symbolising a tenfold growth. 

    This has seen the digital loan apps increase in numbers in order to share in the growing market.

    File image of a man on his phone
    File image of a man on his phone