Some 12 digital lenders in Kenya have agreed that Kenyans indebted to more than one mobile lending application will no longer continue accessing loans from multiple lenders.
While this is still a proposal, the Digital Lenders Association of Kenya (DLAK) want the Credit Reference Bureau (CRB) to put in place a mechanism that will enable DLAK’s members to acquire a borrower’s credit history in real time.
The target is to lock out borrowers with poor credit scores if the proposal sails through.
Multiple loans from multiple fintech lenders
As it is, more than 7.6 million Kenyans have loans from multiple mobile loan apps.
Two per cent of these default and are listed with the Credit Reference Bureaus (CRBs) in the country.
More than 380,000 Kenyans have so far defaulted on loans taken from the mobile money lenders.
Metropol notes that on average, a borrower in the country has loans from at least six out of the 10 mobile money lenders.
Noteworthy is that mobile money loan apps charge unregulated interest rates resulting in exorbitant charges to the borrowers.
The 12 member-DLAK wants to decide whether to advance a loan to any borrower depending on their credit history in as little as 10 minutes.
If the proposal passes, it means that the 12 lenders will have access to a borrower’s history and their creditworthiness.
Already, DLAK has agreed to cap initial loan lending at KShs4,000 for customers without a borrowing history.
Zenka Finance CEO Robert Masinde who doubles up as DLAK Chairperson said the proposal also seeks to ensure that borrowers who default are not trapped in debt.
Rogue mobile money lending apps
The association which announced the signing of their code of conduct on Thursday last week revealed that it was also striving to tame rogue players in the industry.
Masinde added that many new entrants into the industry were making it disorderly and chaotic. He criticised the raising of loan limits in ways that hurt customers.
“We are concerned with malpractices by rogue players emerging in this industry. We can’t just wait for somebody to regulate us. We have to take the first step,” said Masinde.
He revealed that the CRB is currently adjusting its systems to keep up with the changes in the fintech lending sector.
A section of borrowers has raised concerns over the way some lenders have been abusing the lack of regulations in the fintech lending sector to exploit Kenyans.
Some of the complaints include some lenders calling those in a customer’s phonebook demanding that they ask defaulters to pay back. This comes with threats to also list those who receive the calls if the loans are not repaid.
In the newly signed code of conduct, DLAK makes such moves illegal with any of its members using such methods facing disciplinary action.
And in an era of data mining and insecurity, DLAK members have pledged to protect their customers’ data.
There are currently 45 mobile lenders operating in the country and DLAK says there are more applications for membership.
Tala appoints a Kenyan to lead Kenya business
Tala which just celebrated its 5th anniversary has appointed Ivan Mbowa to lead its Kenya business effective 1st June 2019.
Mbowa has over 14 years of experience having worked as the CEO at Umati Capital and in senior management roles at Citigroup across eight different markets in Africa.
At Tala, Ivan will be responsible for the strategic direction, growth, and overall operational oversight of the business.
Tala launched in Kenya as Mkopo Rahisi in 2014 and it claims to have been the first in the world to offer unsecured mobile lending directly to consumers.
It has disbursed loans to over 2.5 million customers globally. The lender targets ‘emerging markets’.