"MPs approve new law to regulate mobile loan rates"

Parliament has cleared a Bill that seeks to regulate mobile loan rates and treatment of defaulted credit to protect borrowers from predatory lending. Lawmakers last Thursday gave their nod for review and debate on the proposed law that if passed will bring tens of digital and mobile lenders under the watch of the Central Bank of Kenya (CBK)...

Tens of unregulated microlenders have invested in Kenya’s credit market in response to the growth in demand for quick loans. Their proliferation has saddled borrowers with high interest rates, which rise up to 520 percent when annualised, leading to mounting defaults and an ever ballooning number of defaulters who have been adversely listed with credit reference bureaus (CRBs).

Market leader M-Shwari, Kenya’s first mobile-based savings and loans product introduced by Safaricom and Commercial Bank of Africa, charges a "facilitation fee" of 7.5 percent on credit regardless of its duration, pushing its annualised loan rate to 395 percent. Tala and Branch, other top players in the mobile digital lending market, offer annualised interest rates of 152.4 percent and 132 percent respectively.