CBK Laws Pushes Google to Ban Unregistered Credit Providers

The Central Bank of Kenya (CBK) has entered into an arrangement with Google in a move that will see unregistered mobile loan apps removed from Google Play Store in a major blow to digital credit providers.

This move comes after CBK licensed only ten digital credit providers, locking out 288 who had been operating in that space, as the regulator attempts to instil discipline in the sector.

“Currently we only accept declarations and licenses from entities published under the Directory of Digital Credit Providers on the official website of the CBK,” Google said.

As part of its strategy to regulate the industry, the CBK announced that it had granted licenses to only 10 digital lending companies in Kenya. The Digital Credit Providers (DCPs), also known as digital lending firms, had until September 17, 2022, to submit an application for a license.

The digital lending companies were given six months to submit their license applications, CBK stated in a March announcement. The companies cannot legally conduct business if they do not submit applications for or obtain the aforementioned licenses.

The move by Google could hit players such as Tala, Haraka and Okash. To escape the trap, Branch became the first mobile digital lender to acquire a majority stake in a banking institution, a month since the law regulating digital lenders came into force.

“You’ll have at least 30 days from the date of this notification to update your app to comply with the following policy changes,” the search engine giant noted.

According to Google, companies that are not directly engaged in money lending activities and are only providing a platform to facilitate money lending by registered DCP(s) to users, will need to provide a copy of the DCP license of their respective partners.

The pushback by the regulator came after public outcry over the abuse of customer data by digital credit providers, some calling relatives and friends to compel borrowers to pay up their loans.

The list of digital lending companies that are authorized to operate in Kenya is Ceres Tech Limited, Getcash Capital Limited, Giando Africa Limited (trading as Flash Credit Africa), Jijenge Credit Limited, Kweli Smart Solutions Limited, Mwanzo Credit Limited.

Others are MyWagepay Limited, Sevi Innovation Limited, Rewot Civo Limited and Sokohela Limited.

The CBK announcement only applies to unregulated digital lending services, which is vital to highlight. This new licence does not apply to digital lending platforms controlled by businesses that are already subject to regulation, like banks and telecommunications corporations.

These ones won’t require a different license and can keep doing business as usual. These include KCB M-PESA, Fuliza, M-Shwari, Timiza.

The regulator however underlined that additional providers will be listed when the screening process for those who submitted applications by the deadline of September 17 proceeds. Part of the statement released by the CBK says that other candidates are at varying levels in this procedure, “mostly awaiting the submission of relevant evidence.”

As low-income households have been drawn in by the convenience of accessibility, mobile loans have increased dramatically over the past few years.

The Digital Credit Providers Regulations, 2021, will result in the closure of any digital lenders that do not adhere to severe consumer protection requirements.

In accordance with the revised regulations, DCPs must submit copies of the applicant’s Certificate of Incorporation, Memorandum, and Articles of Association, as well as those of any major shareholders.

Before granting credit to customers, mobile phone lenders must also reveal the complete cost of their loans, including interest rates, late payment, and rollover costs.