Instant Loans Application to take longer, warns Mobile Lenders

Following the Central Bank of Kenya (CBK) order stopping unregulated digital lenders from blacklisting defaulters, the mobile lenders will cut instant loans of defaulters due difficultly in establishing the creditworthiness of borrowers within hours, the industry lobby warns.

According to the Digital Lenders Association of Kenya (DLAK), some mobile lenders would be required to ask clients to send them bank and M-Pesa statements to validate information on their source and level of income, lengthening the loan application period.

“It is very likely the speed of service delivery will slow down because of that restriction because we had managed to get to a point where already that information was integrated and automated. It’s quite a step back in terms of processing,” said DLAK chairman Robert Masinde on phone.

The digital micro-lenders contributed to the surge in credit status reports requested from the CRBs to 12.40 million in 2018 from 4.38 million the year before, the Central Bank of Kenya (CBK) data show.

The CBK on its side said disconnecting unregulated digital mobile lenders from CRBs is linked to the public outcry over widespread misuse of the credit information sharing (CIS) mechanism.

Only banks like KCB, Cooperative Bank and NCBA Group as well as micro financiers and deposit-taking SACCOs will be allowed to blacklist defaulters with one of Kenya’s three CRBs — Metropol, TransUnion and Creditinfo International.

The fintech firms are locked out at a time when the bulk of accounts negatively listed are linked to mobile digital borrowers.

“It will cause some disruptions because it is going to be difficult to be as efficient and as real-time as it has been for many of the digital lenders. That’s the cost we have to bear with when this restriction is in place,” said Mr. Masinde, also the chief executive of Zenka Finance Kenya.

However, DLAK, which represents 18 firms out of an estimated 50 in the fast-growing industry, acknowledged a “few of the players” have been unprofessional.