Providers of loans via mobile loan apps – also calls digital lenders or digital lenders or Digital Credit Providers (DCPs) have until mid September this year to apply and receive a license from the Central Bank of Kenya (CBK) failure to which they won’t be allowed to operate.
The move follows the announcement by the CBK to the effect that by March 2022, it would publish the Central Bank of Kenya (Digital Credit Providers) Regulations, 2022. The Regulations provide for the licensing and oversight of previously unregulated DCPs.
“Consequently, in accordance with Section 59(2) of the CBK Act, all previously unregulated DCPs are required to apply to CBK for a license within six months of the publication of the Regulations, i.e., by September 17, 2022, or cease operations. Two months have elapsed since the publication of the Regulations and several DCPs have already applied to be licensed,” announced the CBK.
“The purpose of this announcement is to remind all currently unregulated DCPs that have yet to apply for licensing, that they now have four months to the September 17, 2022, deadline. They should apply in good time as no extension will be granted after the application deadline of September 17, 2022. The licensing requirements for DCPs can be accessed here.”
The Regulations seek to, among other things, address concerns raised by the public as relates to the rising number of digital lending service providers, particularly through mobile phones. The concerns relate to the predatory practices of the previously unregulated DCPs, specifically their comparatively high cosst, unethical debt collection practices, and the abuse of personal information.
The Regulations also provide for consumer protection, credit information sharing, and outline the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) obligations of DCPs.
The DCP licensing requirements and procedures are outlined here. Among the requirements are:
- Description of the ICT system to be used in the applicant’s operations and an independent assurance on the systems, description of delivery channels or platforms to be deployed by the applicant, and description of, and terms and conditions of credit products and services which the applicant intends to provide.
- The applicant’s Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) policies and procedures.
- The applicant’s data protection policies and procedures.
- The applicant’s consumer redress mechanisms, policies and procedures.
- Description and evidence of sources of funds to be invested in the applicant.
- Credit policy, code of ethics and market conduct.
- The applicant’s pricing model and parameters.
- Certificate of good conduct, tax compliance certificate and credit reference bureau report for each of the digital credit provider’s individual significant shareholders, directors and senior officers