The Central Bank of Kenya (CBK) has plans to regulate the monthly interest rates charged by digital lenders in Kenya. This regulation is part of the proposed amendments of the CBK Amendment Bill 2020. It will put a limit on non-performing loans so that they do not exceed the principal amount due to the interest rates.
The COVID-19 pandemic has resulted in financial hardship for many families. Many people are turning to micro-lenders for a way out of the situation. Unfortunately, micro-lending platforms are being scrutinized by the government. The CBK wants to curb the number of predatory digital lenders who are seemingly leaving more people bankrupt.
Due to economic hardship, the number of people collecting loans is on the rise. This gave rise to the many predatory lenders that are charging unreasonable monthly interest rates from loaners. In Kenya, the interest charged on loans is reported cases of 520% per year. As a result, the Central Bank of Kenya is imposed a strict rule to regulate operators in the country. A similar case occurred last year when Google cut down on the number of predatory lenders that were registered on the Google Play Store. Despite the penalty, more predatory lenders are taking advantage of the COVID-19 pandemic to explore more people.
The apex bank will be the one to approve price increases on the launch of new products introduced by micro-lenders. Another part of the Bill seeks to regulate how digital financial products handle their product and services, as well as ensuring access to fair credit.
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