Central Organization of Trade Unions (COTU) secretary-general Francis Atwoli has asked the Central Bank of Kenya (CBK) to shut down all digital lenders for allegedly exploiting Kenyans.
In a statement on Tuesday, Atwoli the ‘draconian’ interest rates imposed by the mobile loan apps have impoverished Kenyans in times of economic shocks.
“We would like to remind the CBK governor, who is a practising Christian, that if anything, the conduct of the digital microfinance institutions in Kenya is not only illegal but ungodly. In the name of ‘financial inclusion, the digital microfinance institutions, and by extension mobile lenders, have continued impoverishing Kenyans by imposing draconian interest rates on their credit facilities,” Atwoli said.
“This, in no uncertain terms, is daylight robbery practised by institutions that. in their DNA, are supposed to be helping the poor and small businesses grow. On the flip side, these digital microfinance institutions have not only made the average Kenyan poorer but also killed businesses by making it harder for them to access further credit and eating into their small profits.”
Read: CBK Revokes License of Mobile Payments Provider ‘Tangaza’
With most banks having their interest rates between 12 percent to 14 percent per annum, most of the digital lending facilities have interest rates of between 70 percent to 500 percent per annum.
“Other mobile lenders have an interest rate of 25 percent after every two weeks while others 33 percent for every week. This is ridiculous and unacceptable and no amount of ‘risk factor’ can substantiate this kind of banditry. COTU would like to call upon the Central Bank of Kenya to move with speed and save Kenyans frorn the digital microfinance institutions that are exploiting Kenyans left, right and centre,” added Atwoli.
“It is immoral for anyone to take advantage of the tough financial situations that Kenyans are going through to reap maximum benefits. We equally call upon parliament to come up with sound legislation, on the above subject matter, so as to facilitate the crackdown on the rogue digital microfinance sector in Kenya.”
In April 2020, CBK withdrew the approvals granted to digital (mobile-based) and credit-only lenders as third party credit information providers to Credit Reference Bureaus (CRBs).
Read: Five Reasons Why Developing Mobile Apps Is Expensive
The withdrawal was in response to numerous public complaints over misuse of the Credit Information Sharing System (CIS) by the unregulated digital and credit-only lenders, and particularly their poor responsiveness to customer complaints. Thus, unregulated digital and credit-only lenders no longer submit credit information on their borrowers to CRBs.
Among lenders that were affected included Tala, Alternative Circle, Stawika Capital, Zenka Finance, MyCredit, Okolea, LPesa, Kopacent, Four Kings Investment T/A Sotiwa, Mobile Financial Solutions (MFS), Kuwazo Capital, and Finance Plan Ltd. Other members include Branch, Vaell, Roamtech solutions, Aspira and MicroMobile.
Email your news TIPS to Editor@kahawatungu.com or WhatsApp +254707482874. You can also find us on Telegram through www.t.me/kahawatungu
