Kenya's booming digital lending sector has hit a snag, with over 400 license applications languishing at the Central Bank of Kenya (CBK) due to a lack of clarity on required documentation.

The Digital Financial Services Association of Kenya (DFSAK), representing digital lenders, is urging the CBK to provide more specific guidance.

"Clear guidance from the CBK on details of the pre-requisite documents will help speed up the process," said Kevin Mutiso, DFSAK chairman.

He likened the situation to challenges faced by a new industry navigating regulations for the first time.

This logjam comes despite the CBK granting 19 new licenses recently, following a previous batch of 12 awarded nearly a year ago.

Read More

  1. Kenya’s debt soars to Sh10.8 trillion as pressure on finances mounts
  2. Kenyan banks undertake to lower their interest rates in line with CBK directive
  3. I&M Bank also reduces its lending rates

This indicates a growing number of digital lenders seeking formalization. The introduction of mandatory registration in 2022 marked the beginning of the CBK's efforts to bring the sector under its wing.

Mutiso highlighted the evolving regulatory landscape, with the CBK (Digital Credit Providers) Regulations, 2022 introducing changes like a ban on listing defaulters of under Sh1,000.

"DFSAK remains steadfast in its mission to ensure a professionally managed industry," he affirmed.

The popularity of digital loans stems from their ease of access, providing quick cash for emergencies without collateral requirements.

However, concerns about predatory practices spurred the CBK to take action. Previously, the sector existed in a legal grey area, leading to public outcry about loan pricing and debt collection methods.

The new regulations require lenders to clearly disclose all charges, fees, and interest rates, ensuring transparency for borrowers.

Additionally, lenders can no longer arbitrarily adjust rates, needing CBK approval for any changes.

With these regulations in place, the CBK aims to strike a balance: fostering innovation in the digital lending space while protecting borrowers and promoting responsible lending practices. DFSAK's call for clearer licensing requirements underscores the need for smoother integration of new players into this rapidly evolving sector.