KENYA – The Central Bank of Kenya (CBK) has granted licenses to 19 new digital credit providers (DCPs), raising the total number of registered firms to 51.
As of March 2023, the CBK revealed it had received 480 applications for licensing to comply with Section 59(2) of the CBK Act.
The recently registered companies include Autocheck, Azura, Chapeo, Chime, Creditarea, Decimal, Dexintec, Factorhouse, Fezotech, Fortune, Lipa Later, Lobelitec, Maralal Ledger, Marble Capital, MKM Capital, Pi Capital, Senti Capital, Ubapesa, and Zillions Credit.
In a statement, the regulator mentioned that all the newly licensed credit providers were also duly registered with other regulatory authorities like the Office of the Data Protection Commissioner. This ensures their compliance with the regulations governing the digital lending space.
The CBK is engaging with other relevant regulators and agencies to ensure that the business model, consumer protection measures, and governance of the prospective firms meet the required standards. The CBK emphasized its commitment to ensuring that all authorized lenders abide by the applicable laws and safeguard their customers’ interests.
This new move, following Kenyans’ struggle with high credit costs from banks and other financial sector players, is anticipated to increase competition in the country’s digital lending landscape while maintaining high service delivery standards.
After reports of customer data exploitation and extremely high loan interest rates, the Central Bank of Kenya (CBK) made it mandatory for all digital credit providers (DCPs) to obtain licenses to operate by 2022. This decision was introduced to exert greater regulatory control over Kenya’s financial sector, followed by a six-month compulsory registration period.
This latest announcement reflects the fourth round of licensing. In the first round, the CBK approved 10 DCPs in September 2022, followed by 12 DCPs in the second round in January 2023, and another 10 DCPs in the third round in March 2023.
According to the central bank, additional applicants are at different phases of the registration process, primarily waiting for the submission of necessary documentation.
As such, more DCPs are expected to be licensed in the future. The CBK has encouraged these applicants to promptly furnish the required paperwork to facilitate the completion of their application reviews.
In 2022, through the CBK, Kenya purged all digital lending companies for operating without license. The directive implied that these companies, which had grown to hundreds, had to cease operations immediately and apply for a permit from the CBK.
The licenses were structured around a new law, the CBK (Digital Credit Providers) Regulations, 2022, which introduced data protection laws to safeguard borrowers from illegally using their personal information.
Before these changes, Kenya had hundreds of unlicensed digital lending platforms. However, concerns about high-interest rates, personal data abuses, and unethical debt collection practices compelled the government to act.
After the law was passed, only a few digital lenders could provide their services to Kenyans, including Branch, which operates in other markets such as Nigeria and Tanzania, and Tala. Then, over 480 digital lenders applied for the license, indicating the lucrative nature of the online lending business in the country.
The regulatory change was a response to public outcry over the unchecked practices of digital lenders. These companies charged excessive interest rates, sometimes up to 400% per year, among other unethical business practices.
Under the new law, the CBK (Digital Credit Providers) Regulations, 2022, all digital credit must register as data controllers and processors with the Office of Data Protection (ODPC). Credit providers must also provide evidence of their source of funds as an anti-money laundering directive.
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