The government has started cracking down on dishonest online lenders milking money from struggling Kenyans through giving secret high interest loans.
Through the Competition Authority of Kenya (CAK), the government has enacted new policies aimed at protecting customers from exaggerated cost of getting loans.
The new policy now require mobile lenders to reveal their full fees and penalties to the authority every four months as part of efforts to eliminate the problem of hidden charges.
According to CAK, the customer should be informed of all charges and fees payable prior to the same being imposed.
“The policy recommendations from the study are requiring digital lenders to provide periodic reports on the actual total charges paid by borrowers, including late payment and loan rollover charges.
“Pricing of digital loans was not an important factor to borrowers in choosing the lender. The two main considerations are speed of disbursement and ease of repayment,” CAK director-general Wang’ombe Kariuki stated in the 2021 Auditor-General’s report.
The online lenders have also been faulted for abusing personal information obtained from defaulters to harass their relatives and friends with messages concerning the default payments and asking them to enforce repayment.
The push to protect customers from the digital lenders comes nearly two years after the country removed the legal cap on commercial lending rates.
According to a report published by Business Daily, market leader M-Shwari, the Kenya’s first mobile-based savings and loans product introduced by Safaricom and NCBA in 2012, charges a ‘facilitation fee’ of 7.5 percent on credit regardless of its duration, pushing its annualized loan rate to 90 percent.
Tala and Branch, the other top players in the mobile digital lending market, offer annualized interest rates of 84 to 152.4 percent and 156 to 348 percent respectively.