The Central Bank of Kenya (CBK) will start controlling interest rates on digital loans under a new law that aims to protect Kenyan borrowers from predatory lending.
President Uhuru Kenyatta enacted the Central Bank Law of 2021 on Tuesday afternoon, making legal changes that for the first time put digital lenders under the supervision of the banking regulator.
CBK Law 2021 will see lenders seek Central Bank approval for pricing their loans, subjecting them to the same rules as commercial banks.
The law addresses growing concerns about predatory lending from digital lenders where borrowers do not have full access to information on prices, penalties for default and collection of unpaid loans.
“The amended Central Bank Act of 2021 gives the Central Bank of Kenya the power to authorize digital lenders in the country and ensure the existence of fair and non-discriminatory practices in the credit market,” it read. Tuesday in a State House statement. afternoon.
Digital lenders will now set their loan interest rates within parameters approved by the CBK in an effort to protect borrowers from predatory loans that have thrown many into the debt trap.
In recent years, businesses have flooded the local market in response to rapid credit that does not require collateral unlike banks and microfinance institutions. Borrowers get loans in minutes through their cell phones, making digital loans a quick fix for everyday bills.
The CBK says borrowers using digital loans from unregulated lenders have grown to over two million two years ago, from around 200,000 in 2016, underscoring their popularity.
The proliferation of lenders, however, has imposed high interest rates on borrowers that have climbed to 520% per annum, leading to an increase in defaults and an ever-increasing number of defaults.
The President also approved the Public-Private Partnerships Bill, which repeals the 2013 legislation by providing an elaborate legal framework to cover PPP projects at the national and county levels.
In addition, the new law expands the role of the private sector in PPP initiatives beyond finance to include construction, operation and maintenance of projects.
The Trustees (Perpetual Succession) (Amendment) Bill was also enacted, which simplifies the registration of trusts, among other reforms, by transferring the administration of the process to the new office of the Chief Records Registrar.