Briefcase digital lenders wince under CBK glare – Business Daily
The Central bank of Kenya, Nairobi on Wednesday, December 30, 2020. PHOTO | DENNIS ONSONGO | NMG
Briefcase digital lenders are facing licensing headwinds after falling foul of the new requirement by the Central Bank of Kenya (CBK) that all players in the sector must have a physical office in the country, which will allow for inspections by security and monetary agencies.
The new regulations published earlier his year state that the lenders must have offices locally that are open to inspection by the CBK or its appointed agencies at any time.
Industry CEOs who spoke to Business Daily reckon that most of the foreign-owned digital lenders have previously operated virtually due to the lack of a law that required them to have a physical presence.
CBK has so far permitted 10 digital lenders from the dozens that have flooded the country in the past few years to tap into the growing demand for quick, collateral-free credit.
“This (lack of offices) is one of the reasons, plus a host of others like opacity in the source of their funds. Most of them originate funds from tax havens and areas where money laundering is not restricted and CBK and other State agencies like Financial Reporting Centre are not able to authenticate their sources of funds,” said a CEO of one of the lenders, who declined to be named.
A multi-agency team drawing members from the security agencies has been inspecting offices of the lenders as part of the checks required before issuance of the CBK licence.
Some of the foreign-owned digital lenders have been linked to nationals from Philippines, China and Nigeria.
CBK data shows that borrowers of digital loans hit more than two million in 2020, up from an estimated 200,000 in 2016. Parliament amended the law last year as the State moved in to regulate an industry that the CBK has previously flagged as possible avenue for money-laundering.
Digital lenders have also been on the spot for failing to fully disclose the terms of their loans, steep interest rates and also bombarding friends and relatives of borrowers who default on their loans.
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