Parliament has directed the Central Bank of Kenya (CBK) to tighten the laws governing the buy-now-pay-later (BNPL) firms that expose borrowers to higher interest rates and harsh repayment terms.
The National Assembly’s Finance and National Planning Committee has given CBK Governor Kamau Thugge two weeks to table amendments for the regulator to exercise control over the interest rates the BNPL firms charge.
The committee chaired by Molo MP Kuria Kimani told Dr Thugge that the existing regulations governing the sector are those of the digital credit providers and do not actively cover the BNPL firms.
The committee met Dr Thugge following the recent outcry on exploitation by firms that finance the acquisition of motorcycle taxis (boda bodas) on credit.
The committee said it had received complaints from the boda boda operators who have accused firms of exploitation and suspicious loss of motorbikes sold to them before full repayment of the loans.
The committee wanted Dr Thugge to provide measures the CBK uses to check the rogue lenders and the plans the government has to develop alternative financing models that are fair, transparent and genuine to empower boda boda operators.
The committee disputed Dr Thugge’s responses that the business of BNPL companies falls within the definition of digital credit business under the CBK regulations of 2022.
“We strongly feel that there is a gap or a legal lacuna preventing a complete oversight of the Buy Now Pay Later firms by the CBK. The products they offer are not licensed as DCPs [digital credit providers],” Mr Kimani said.
“We all need to agree that there is a gap because the matter in question does not fall under digital credit channels and that is why these people are exploiting our boda boda people because they do not fall under the DCPs.”
“I direct you to form a team to look at the existing laws to fix the existing legal gaps. We are giving you 14 days to come up with proposed amendments so that we take them into account in the Finance Bill, 2024/25,” the Molo MP said.
“We will look at the laws to ensure we tighten provisions governing BNPL businesses,” Dr Thugge said, adding the DCPs are regulated under the Central Bank of Kenya Act and the Central Bank of Kenya (Digital Credit Providers) Regulations, 2022.
