A couple of days ago, I was having a chat with a friend about the number of online lenders that have come up after the success, and perhaps, the profitability of fintech companies in the country. The chat was fueled by our banks’ decision to push loan services on their mobile apps, a development that has actually been particularly on news headlines in the past week or so.
While testing some of the services linked above, I was dumbfounded by the number of no-name, never-heard-of and suspicious apps whose names are derivatives or minor edits of popular lenders such as Equity Bank. It struck me that some such services are actually not licensed to perform their trade in a country where people have a notable appetite for online loans.
Our worries have been confirmed by the Central Bank of Kenya (CBK), which has admitted that its regulatory framework is limited to financial institutions that take deposits, but has a trivial legal mandate to regulate digital platforms that only dish out loans. In line with this loophole, it is apparent why fintech apps are flooding app stores to lure unsuspecting Kenyans into using their services, who, through no fault of their own, cannot verify their authenticity – and end up paying huge returns owing to the risks the lenders take to giving them you money.
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As such, the CBK has started lobbying for tough policing of digital lenders based on the National Payment Systems Act. This push came into light when he CBK Governor Dr. Patrick Njoroge was addressing the Department Committee on Communication, Information, and Information.
During the address, it emerged that more than 6.5 million Kenyans use online loan apps, and 3 percent of the group use the funds secured from the platforms to bet. It is not clear how lobbying will include a clause to address the fact that most Kenyans who use these services suffer from a deficiency of financial literacy.
It is saddening that the CBK gets to warn people against the use of unlicensed loan apps, which does as much as selling shoes to a snake. It has also emerged that some of the lenders are global companies that only target profits.
We will update this post as soon as the Act gains some traction.
Culled from: Techweez
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