Digital Lenders Launch Lobby Group in Response to New Regulations

Digital money lenders on Thursday announced the launch of a lobby group, the Digital Lenders Association of Kenya (DLAK) shortly after the Banking Charter came into effect.

The Charter was a move by the government aimed at regulating the financial sector.

Mr. Robert Masinde, the DLAK chairperson and Zenka Finance CEO, said that the association will create good practices for industry development, engage with the government on regulations concerning the sector and assist each other in addressing pain points within the industry.

“A vibrant and diverse digital lending sector has successfully established itself in the country and we feel the time is right to give it a voice and promote global best standards … DLAK will enable digital lenders to speak with a common voice, promote best practices,” he said.

DLAK consists of 12 leading digital-first loan providers in addition to other key stakeholders. Its main aim is to set ethical and professional standards in the industry, to collaborate with policymakers and other stakeholders in addressing industry issues, contribute to knowledge and learning and to drive the overall growth of the digital lending and fintech sector.

The members include MyCredit, Kuwazo Capital, Zenka Finance, Tala, Finance Plan Ltd, Kopacent, Alternative Circle, Mobile Financial Solutions, Okolea, Four Kings Investment T/A Sotiwa, LPesa and Stawika Capital.

The lobby group’s focus will initially be centered on dealing with the regulatory challenges posed by the Banking Charter and the promotion of ethical business practices in the industry and conducting consumer sensitization programmes.

CBK Governor Patrick Njoroge had last week expressed hope for the deregistration of some mobile money lenders, terming them as “simply 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.

Loans from digital lenders can attract an annual interest rate ranging between 18 and 200 percent.

The findings of a Financial Sector Deepening survey conducted last year showed that digital lending is rife with a distinct lack of privacy, with borrowers paying fees they were unaware of.