Digital lenders will reduce instant loans in line with CRB directive

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Digital lenders will reduce instant loans in line with CRB directive


Digital lenders will reduce instant loans in accordance with the CRB directive. PHOTO FILE | NMG

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  • Micro businesses and individuals who depend on unregulated digital lenders for instant loans will experience delays in obtaining credit after mobile financiers were prevented from passing on defaults’ names to credit reference bureaus (CRBs) , warns the industry lobby.
  • The Digital Lenders Association of Kenya (DLAK) said some of the mobile lenders would be forced to require customers to send them bank statements and M-Pesa to validate information on their source and income level, thereby lengthening the period of payment. loan application.

Digital lenders will cut instant loans after the Central Bank of Kenya (CBK) default blacklist order cuts credit reports, the industry lobby warns.

The Digital Lenders Association of Kenya (DLAK) said some of the mobile lenders would be forced to require customers to send them bank statements and M-Pesa to validate information on their source and income level, thereby lengthening the period of payment. loan application.

They believe the order prohibiting unregulated digital lenders from blacklisting defaults will reduce the number of people on CRB’s radar, making it difficult for the company to establish borrower creditworthiness within hours.

“It is very likely that the speed of service delivery will slow down because of this restriction, as we had managed to reach a point where already this information was integrated and automated. It’s a step backwards in terms of treatment, ”DLAK President Robert Masinde said over the phone.

Digital micro-lenders were the main driver of the increase in credit status reports requested from CRBs to 12.40 million in 2018, from 4.38 million in the previous year, according to central bank data of Kenya (CBK).

CBK says the disconnection of unregulated digital mobile lenders from CRBs is linked to public outcry over widespread abuse of the Credit Information Sharing Mechanism (CIS).

This means that only banks like KCB, Cooperative Bank and NCBA Group as well as micro-financiers and deposit banks will be allowed to blacklist defaulters with one of Kenya’s three CRBs – Metropol, TransUnion and Creditinfo. International.

Fintech companies are stranded at a time when most of the negative listed accounts are linked to mobile digital borrowers.

But with the platforms, which include Branch and Tala, now locked down, the database of credit history information will shrink, forcing some to rely on other sources that require more. time to check.

“This will cause disruption because it will be difficult to be as efficient and in real time as it has been for many digital lenders. This is the cost that we have to bear when this restriction is in place, ”said Mr. Masinde, also Managing Director of Zenka Finance Kenya.

DLAK, which represents 18 out of an estimated 50 companies in the fast-growing industry, acknowledged that “some of the players” had not been professionals.

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