Google has recently implemented a new policy in Kenya, requiring digital lenders to submit proof of their licenses from the Central Bank of Kenya (CBK) in order to be listed on the Google Play Store. The policy aims to crack down on rogue loan apps that have been operating in the country and is similar to measures that have been taken in India, Indonesia, and the Philippines. The new rules for digital lenders in Kenya have been put in place to weed out bad actors and bolster the sector’s growth.
As a result of this new policy, only providers with licenses from the CBK will be listed on the Play Store. For digital lenders whose applications are pending, they can obtain Google’s interim approval, but it will only be valid for 45 days. Once this period elapses, the unlicensed providers will be required to resubmit the declaration form attesting that the approval from CBK is still pending. If the application for a license is rejected during the 45-day period, interim approval will be immediately rescinded.
Currently, only 22 digital lenders have been licensed in Kenya, of the 381 that have applied. Among these licensed providers are Tala, a PayPal-backed loan app; Pezesha, a B2B embedded lending platform; and Jumo, a fintech providing financial services including lending. The new policy comes as a response to a regulatory environment in Kenya that requires digital lenders to avoid the use of threats or debt-shaming tactics, including the posting of personal information on online forums, unauthorized calls and messages to customers, and access to their contact lists for purposes of coercion in case of default.
Loan apps in Kenya have been collecting borrowers’ phone data, including contacts, and demanding access to messages to check the history of mobile money transactions for credit scoring and as conditions for disbursing loans. Rogue lenders have been sharing some of the contact information with third-party debt collectors without prior consent. To combat this, Kenyan law requires loan apps to reveal their pricing model and disclose all the terms and charges to customers in advance. They are also required to notify the regulator before introducing new products or making changes to existing ones, disclose their source of funds, and provide evidence of the same to confirm that they are not engaging in financial crimes like money laundering.
Kenya and Nigeria are major tech hubs in Africa and have witnessed the proliferation of loan apps that offer quick unsecured personal or business loans. However, the lack of stringent regulations, and Google Play Store’s slack vetting process, have enabled the rise of rogue operators. Google’s move to curb unregulated loan apps in Kenya is a welcome development that will ensure better protection of citizens.