Once vibrant digital lenders market segment is now facing uncertain future especially after they were denied access to credit reference bureaus. The move consequently meant they could not forward defaulters to the CRB’s, making it even harder for them to compel borrowers to pay for the loans. According to the chairman of digital lenders association, Kevin Mutiso, members in the sector were lending close to 4 billion monthly before the pandemic, but now have cut spending to just 2 billion after the financial regulator denied them access to the CRB listings.
Since they cannot access CRB’s, they are unable to make those quick loan decisions as was the case before and lack a way of forcing borrowers to pay for their loans like before. The central bank of Kenya kicked unregulated digital lenders out of CRB’s making their businesses difficult as they now lacked recourse on making borrowers to pay. Some of these unregulated lenders were accused of using exorbitant interest rates that left borrowers hooked on loans forever, and in some cases were using illegal means to force borrowers to pay such as sending text messages and making calls to contacts.
Speaking on the current status, DLAK chairman said they were issuing close to 4 billion loans in pre-COVID-19 era, but have now halved that amount since 2020 after the Kenyan government unveiled a raft of new regulations to manage digital lenders. According to the association which consists of Tala, Zenka, MyCredit, Lpesa, Four Kings Investment, Kuwazo Capital, Stawika and Alternate Circle, an average of six million Kenyans borrow around KES 4,000 for a period of 3 months.
There were as many defaulters in pre-COVID-19 era since most of them took low value loans for a short repayment period. According to official figures at the CRB’s, 90 percent of blacklisted borrowers were those who had taken loans from digital lenders.