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Tala, Branch Stops Giving Loans to New Customers Over CRB Freeze

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Digital Lending app

Digital Lending app

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Digital lenders have stopped giving loans to customers who are not in their database over continued freeze out of the credit reference bureaus (CRB).

The move follows the current regulations that prevent the digital lenders from blacklisting defaulters, something the online lenders say will hinder collection of their loans, leading to huge losses.

According to the regulations, the online lenders can only access borrowers credit information from CRB with the consent of the borrower and Central Bank of Kenya (CBK).

Digital Lenders Association of Kenya (DLAK) chairman Kevin Mutiso told Business Daily that its members will now only give loans to the current three million active borrowers on their own databases, a move that is likely to deny many borrowers the short-term loans.

“We will just set new rules and say no to new customers because if we are not able to access the bureau, we can’t know the record of a new customer,” Mutiso stated.

The lobby represents 25 digital lenders including Tala, Branch, Zenka, Okolea, and Stawika.

The firms had listed several defaulters owing amounts below Ksh1000, forcing the Central Bank of Kenya (CBK) to issue measures that only defaults above Ksh1000 will be shared with CRBs.

According to CRB, there are more than100 unregistered lenders operating in the the country.

Unlike traditional banks which require a paperwork-intensive process and collateral to offer loans, digital lending apps dispense quick loans, often within minutes, and determine creditworthiness by scouring smartphone data including SMS, call logs, bank balance messages, and bill payment receipts.

The trend predictably gained traction among middle-class and lower-income earners who typically found access to credit through traditional banks out of reach.

The freezing out of digital lenders from CRBs has since see the online lenders cut their lending by half from about five million customers and loans disbursed to an average of Ksh1.8 billion a month from Ksh4 billion.