Nairobi: The growing economic hardships in the country have pushed most Kenyans to seek respite by borrowing billions of shillings from digital lenders to meet their daily consumption needs. Latest data from the Central Bank of Kenya indicated that over eight million accounts had borrowed over Sh150 billion from digital lenders, with most customers borrowing for consumption and to meet their livelihoods.
According to Kenya News Agency, Metropol Credit Reference Bureau CEO, Gideon Kipyakwai, stated that the country was borrowing at very high rates due to a trust deficit that was hindering access to credit. This, he said, had led most customers to turn to digital lenders to offset their basic needs, after most being locked out of formal banking and lending platforms. Kipyakwai mentioned that the institution was midwifing the trust relationship between lenders and borrowers in a bid to address the trust issues that traditional lending institutions were facing.
Speaking on the sidelines of the 3rd National Cred
it Market Convention in Naivasha, Kipyakwai said the Central Bank of Kenya had so far approved 300 lending institutions, with hundreds of others pending approval. The CEO called on the lending platforms to use existing data and modern technologies to determine creditworthiness, enhance access to credit for customers, and avoid the high default rates being witnessed in the sector. Kipyakwai said Metropol had registered over 32 million customer profiles on its platforms, which he termed a success story for the financial mechanism, ecosystem, credit community, credit fraternity, and credit market.
Kipyakwai highlighted that digital lending institutions have filled the gap in access to credit away from traditional lending platforms in the market, with Kenyans borrowing billions of shillings within a click of a button through their smartphones. He noted that over 80 percent of adult Kenyans were registered on the Credit Reference Bureau, which the lending platforms were using to assess the creditworthiness and cr
edit score of customers, a move that enabled them to avoid high default rates. The CEO added that the country had achieved a high financial inclusion of 84 percent, with small and medium enterprise lending standing at 30 percent, which had enhanced access to credit for tens of customers.
Kipyakwai called on the CBK to expedite the review and approval of the pending list of lenders to streamline and align the lending platforms with the already passed data protection laws that cushioned customers from a section of lending predators. On his part, former principal secretary Dr. Bitange Ndemo said most of the customers have turned to digital lenders for consumption needs but not for investments, which underscored the economic situation facing Kenyans. Ndemo called for more regulations in the sector to tighten the noose on the illegal lenders that were using unorthodox methods and mistreating customers, which he noted would build more trust in the sector.
Ndemo urged the sector to leverage the use of Artificial I
ntelligence and big data to determine the creditworthiness of customers, adding that data protection was crucial in the rapid growth of the sector. According to Rashmi Pillai, the CEO of Financial Sector Deepening Kenya (FSD), the sector had registered a high number of lenders, pointing out that there was a need to build more reliable services that met customers’ needs. Pillai underscores the need for protection of customers’ data in order to build a more robust credit market that guarantees trust, adding that CBK was on the front line in regulating the sector to curb predators and fraud.
According to the adopted regulations, all licensed lenders must comply with data protection rules, full disclosure of loan costs, fair debt collection practices, anti-money laundering standards, and restrictions on unethical credit reporting.
