Central Bank of Kenya has revealed that there are an alarming 400 digital credit providers (DCPs) operating illegally amid concerns over digital lenders offering predatory loans.
This emerged during a session by the Senate Committee on Finance with CBK Governor Dr Kamau Thugge to shade light on DCPs offering loans to Kenyans at very high interest rates.
The Committee put the CBK boss on the spot for failing to reign in on the hundreds of unregulated lending firms hence posing a huge risk to the millions of credulous Kenyans.
“I think now that they have been brought under the ambit of the Central Bank, I think we now have 32 Digital Credit Providers who are licensed by the Central Bank,” said Dr Thugge.
The probe by the Ali Roba-led Senate committee stemmed from public petitions against four DCPs taxing huge interests violating the Digital Credit Providers Regulations 2021.
The four companies mentioned in the petitions by members of the public filed before the committee are Momentum Credit Company Limited, Mogo, Watu Progressive, and M-Kopa.
CBK is within two weeks expected to provide the committee with a detailed report auditing all digital lenders and outlining measures the regulator has taken to tame rogue lenders.
The Committee is also probing claims that some banks in Kenya were colluding with frauds to illegally withdraw cash from clients’ accounts with CBK promising more severe penalties.
In June 2023, CBK revealed that more than 400 digital credit providers had sought licenses to operate in Kenya signaling a rise in the number of Kenyans seeking quick credit solutions.
This was in the wake of the tightening of credit terms by top banks in Kenya with most applying risk-based lending modules that locked out individuals with poor credit histories.
The number considerably exceeded the initial forecast by CBK of 200 applications with only 32 DCPs having been licensed to operate in Kenya after meeting regulatory requirements.