The National Assembly Committee on Finance and National Planning has embarked on legislative reforms aimed at freeing boda boda operators from alleged exploitation by predatory digital lenders. This initiative follows a petition from the Digital Boda Drivers and Deliveries Association of Kenya, highlighting systemic challenges in the Buy-Now-Pay-Later (BNPL) credit sector.
Petitions from Operators
The boda boda sector, an integral part of Kenya’s transport industry, has been plagued by unregulated lending practices, leaving operators vulnerable to exorbitant costs and harassment during debt recovery. Led by Calvince Okumu, the association emphasized the absence of a legal framework governing digital riders. They argued that while the Boda-Boda Regulations of 2015 focus on conventional riders, they fail to address the digital component of the sector.
In response, MPs initiated public participation to incorporate diverse perspectives into three critical Bills: the Tax Laws (Amendment) Bill 2024, the Tax Procedures (Amendment) Bill 2024, and the Business Laws (Amendment) Bill 2024. These proposals aim to protect operators purchasing motorcycles through BNPL arrangements and regulate the conduct of digital lenders.
Key Provisions of the Proposed Laws
The Business Laws (Amendment) Bill, 2024, a cornerstone of the legislative agenda, seeks to introduce comprehensive consumer protections. It proposes amendments to the Central Bank Act, mandating the licensing of all non-deposit-taking microfinance businesses. This move will bring currently unregulated entities under the purview of the Central Bank, ensuring compliance with a strict code of conduct.
To safeguard borrowers, the Bill requires lenders to provide transparent information about loan terms, financial costs, and borrower rights. Additionally, it introduces strict penalties for unethical practices, including harassment, abusive language, or coercive methods during debt recovery.
Okumu highlighted the necessity of these protections, noting, “Digital riders are a unique sector of the transport industry, yet existing laws exclude them from essential safeguards. This legislation is critical to address this disparity.”
Broader Financial Sector Reforms
The push for boda boda protections is part of a broader effort to streamline Kenya’s financial sector. Alongside the Business Laws (Amendment) Bill, the Finance Committee is considering amendments to five other Acts, including the Public Finance Management (Amendment) Act, 2024, and the Public Procurement and Disposal Act (Amendment) Bill, 2024. These reforms seek to enhance financial transparency and accountability while addressing consumer exploitation across various sectors.
Impact on Digital Lenders
The proposed laws mark a significant shift in how digital lenders operate in Kenya. By requiring licensing and enforcing ethical debt recovery practices, the legislation aims to balance innovation with consumer protection. Lenders who fail to adhere to these provisions face penalties, signaling the government’s commitment to regulating the fast-growing digital lending sector.
For boda boda operators, the anticipated laws offer hope for economic stability and dignity. The BNPL model has been a double-edged sword for many riders, providing access to motorcycles while trapping them in cycles of unmanageable debt due to opaque terms and high-interest rates.
Public Participation and Next Steps
The Bills have undergone public participation, enabling stakeholders from across Kenya to voice their concerns and suggestions. Following the First Reading in Parliament on November 13, 2024, the Business Laws (Amendment) Bill has been committed to two departmental committees for further deliberation.
If passed, these laws will not only protect boda boda operators but also set a precedent for regulating other informal sectors facing exploitation. The Finance and National Planning Committee’s efforts reflect a broader ambition to promote fairness and equity in Kenya’s financial ecosystem.
This legislative push underscores the critical role of Parliament in addressing socio-economic challenges and protecting vulnerable groups from exploitation in a rapidly evolving digital economy.
