Digital lenders in the country are facing several challenges as many need help to obtain operational licenses from the Central Bank of Kenya (CBK) and are also being blocked from the Google Play store.
While 278 digital credit providers (DCPs) have submitted their applications to the Central Bank of Kenya (CBK) for operational licenses, they are yet to receive approval, causing disruptions to their business. These companies collect billions of shillings for lending to cash-strapped Kenyans; however, they need help acquiring new funds from skittish investors insisting on CBK certification before releasing the money.
In addition, US tech giant Google has yet to host mobile loan applications without CBK permits on its Play Store since December 15, 2021. It means that millions of short-term borrowers still need to download or update personal loan apps from lenders to obtain licenses. It has further compounded the difficulties faced by digital lenders.
The CBK has implemented a new licensing regime that seeks to rein in those who practice predatory lending and violate consumer privacy. In September 2021, the regulator issued ten permits under this regime, but the remaining 278 firms are still awaiting approval. The regulator has allowed these firms to continue with their business while waiting for the licensing process to be completed, but they face credibility risks derailing operations.
The delays in issuing licenses to digital lenders have also been partly attributed to the process of submitting multiple pieces of documentation, which runs into hundreds of pages per applicant. The CBK has promised to fast-track applications, but many firms are still awaiting approval.
The proliferation of digital lenders in the market has also increased scrutiny and criticism. Consumers have complained about high-interest rates and infringement of data privacy by digital lenders. It led to the passage of a new law in December 2021, which brought digital lenders under the watch of the banking regulator for the first time.
The CBK has also been criticized for its slow response time, with some digital lenders suggesting that the regulator may need more capacity issues and be overwhelmed by the number of applications.
Digital lending in Kenya is facing several challenges, including delays in obtaining operational licenses, lack of funding, and blocking mobile loan applications on the Google Play store. Consumers are also concerned about high-interest rates and infringement of data privacy by digital lenders, which has led to increased industry scrutiny. The CBK has promised to fast-track applications, but many digital lenders are still waiting for approval and facing credibility risks derailing operations.