CBK Set to Regulate Mobile Lenders

Mobile loan providers face regulation by the Central Bank of Kenya (CBK) under new strict guidelines outlined in the Banking Charter that came into effect yesterday.

Patrick Njoroge, the CBK Governor, expressed his hope that some of the companies would be stamped out, terming them as “fancy shylocks”.

“There has to be a proper regulation, where similar products are regulated in a similar way so long as you are lending to customers or receiving deposits. If you have a banking function, it’s not just about the name; you have to be regulated in the same way or it will lead to arbitrage,” said Dr. Njoroge while speaking at the Monetary Policy Committee (MPC) briefing held in Nairobi on Tuesday.

The proposed guidelines in the CBK Banking Charter would require lenders to send messages to borrowers outlining the terms of the mobile loan before approval.

For digital products, the Banking Charter states that it is important for the abridged version of the terms and conditions to be provided via the Unstructured Supplementary Service Data (USSD) format before acceptance of the loan.

“Terms and conditions of their products, including but not limited to allowance of cooling-off period, customer complaint processes, protection of consumer data and privacy should be disclosed,” CBK stated.

It also added that documentation should also contain full disclosures including key fact statements, websites and credit agreements.

Furthermore, the lenders’ places of business would be required to have abridged versions of their loan facilities’ salient features. They include agents, headquarters, outlets, branches and marketing offices.

According to observations by the CBK, a number of mobile loan facilities in the country such as those provided by Fuliza, Tala, and Berry, are long and densely-worded and most consumers remain ignorant of what they sign up for.

The CBK Governor stated that certain things should not be allowed, adding that it was his hope that by the time they get the laws most of them would cease to exist.

“If they are not serving a purpose, then they should go,” he said.