Digital credit providers in Kenya have raised alarms over the increasing indebtedness among citizens, exacerbated by challenging economic conditions. According to the Digital Financial Services Association of Kenya, digital lenders serve a total of 8 million customers, disbursing between Ksh.10 billion to Ksh.15 billion monthly. However, the absence of a credit information-sharing framework has left these lenders vulnerable to fraudsters who default on their loans.
“We just released the Money Match Report recently and learned that 6 out of every 10 Kenyans have more than one loan. When you start to consider these statistics in a market experiencing high inflation, it highlights the significant challenges Kenyans are facing,” said Annstella Mumbi, Tala’s General Manager for Kenya. Similarly, Gideon Kipyakwai, CEO of Metropol, highlighted a case of a borrower who had taken loans from 30 institutions without repaying any, attributing this to the 2020 removal of fintech and microfinance institutions from the Credit Reference Bureau (CRB), preventing digital lenders from sharing data with credit bureaus.
The Office of the Data Protection Commissioner has received nearly 4,000 complaints about digital lenders, with 2,325 cases already determined. Commissioner Immaculate Kassait reported that the commission has issued enforcement notices to 150 digital lenders, closed 36 cases, and is investigating 9 more. The commission has fined some digital lenders up to Ksh.5 million for breaches of data laws and is considering sharing information on frequent infringers with the Central Bank of Kenya (CBK) for further action.
In response to these challenges, digital lenders are collaborating with regulators and industry players to address the issues. This collaboration has led to a decline in harassment and debt-shaming practices by rogue lenders, protecting customers from unnecessary stigmatization. “We’ve come up with guidance notes that have helped digital lenders be more compliant, reducing the number of complaints and incidences of debt shaming,” said Kevin Mutiso, Chairman of DFSAK. Commissioner Kassait added, “If we have registered you as a digital lender and there is a repeat offense, we are considering sharing this information with the central bank for them to be aware of violations of the Data Protection Act.”
Currently, the CBK has licensed only 51 digital lenders to operate in Kenya, with over 500 others having submitted their applications.
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