At least 574 digital lenders are awaiting Central Bank of Kenya (CBK) clearance, with the regulator having licensed under a fifth of the applicants since the regulations governing mobile-based loans were introduced three years ago.
CBK on Thursday announced the licensing of 41 more Digital Credit Providers (DCPs), in the latest round of approvals. This is the latest clearance since October 2024 when it licensed 27 digital lenders.
The latest clearance has brought the cumulative number to 126 out of the over 700 applications that CBK has received since March 2022.
This means more than 574 applicants or 82 percent of entities interested in offering digital credit are still on the waiting list, pointing to the sustained interest in this financial space.
“Other applicants are at different stages in the process, largely awaiting the submission of requisite documentation. We urge these applicants to submit the pending documentation expeditiously to enable completion of the review of their applications” said CBK in a statement.
CBK says it has been working closely with the applicants in reviewing their applications and also engaging other regulators and agencies pertinent to the licensing process, including the Office of the Data Protection Commissioner.
“The focus of the engagements has been inter alia on business models, consumer protection and fitness and propriety of proposed shareholders, directors, and management. This is to ensure adherence to the relevant laws and importantly that the interests of customers are safeguarded,” added CBK.
The regulator introduced the CBK (Digital Credit Providers) Regulations, 2022 which among other things, bars digital lenders from listing defaulters of below Sh1,000 with the Credit Reference Bureaus.
Last year in March, the Digital Financial Services Association of Kenya (DFSAK), an umbrella body for digital loan providers, wrote to the CBK seeking guidance on details of the required documents to help speed up the clearance process.
DFSAK claimed many of the challenges faced by DCPs in meeting regulatory standards for clearance are because they are coming under regulation for the first time and lack clarity on what to submit.
“In light of this, DFSAK urges CBK to provide guidance notes, similar to those issued by the Office of the Data Protection Commissioner (in December 2023), to assist DCPs in enhancing the quality of their submissions,” said Kevin Mutiso, the chairman of DFSAK last year.
CBK started regulating this space to remove the legal lacuna that had attracted public outcry about the pricing of digital loans and the extent to which lenders could go to recover their money from defaulters.
Digital loans have gained popularity due to their ease of application for borrowers seeking quick cash for emergencies and survival without requiring collateral.
Many customers had raised concerns about predatory practices, in particular the high cost of loans, unethical debt collection practices and abuse of personal information.
