Pass Bill in mobile loans

Pass Bill in mobile loans

Editorials

Pass Bill in mobile loans

Tuesday, August 10, 2021

Deputies during a session in the Houses of Parliament. PHOTO | PROCEEDINGS

Pass Bill in mobile loans

By DAILY BUSINESS
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Summary

  • The proposed law that gives the Central Bank of Kenya (CBK) powers to control the interest rates of digital lenders is welcome given the growing popularity of these microcredits.
  • The parliamentary committee on Finance and National Planning approved the Central Bank Amendment Bill 2021 and added a clause that gives the CBK powers to set the price of interest rates on digital loans.

The proposed law that gives the Central Bank of Kenya (CBK) powers to control the interest rates of digital lenders is welcome given the growing popularity of these microcredits.

The parliamentary committee on Finance and National Planning approved the Central Bank Amendment Bill 2021 and added a clause that gives the CBK powers to set the price of interest rates on digital loans.

The proposed law will also make the regulator monitor its products, manage and share borrower information.

Providing parameters for digital credit providers to set the cost of credit is crucial given the high digital loan rates that have plunged many borrowers into debt traps.

Unregulated microlenders have charged borrowers high interest rates, which rise as much as 520 percent when annualized.

Therefore, regulating the parameters for setting the price of these loans will be an advantage for both digital lenders and borrowers in order to achieve sustainable financing. Digital lenders are prepared to create better lending models and also control inefficiencies to ensure that they can reduce rates to levels that reduce defaults.

Business