Treasury Cabinet Secretary John Mbadi has announced that digital lending apps face hefty fines and risk losing their licences for exploitative interest rates and harassment of Kenyans.
Appearing before the Senate on Wednesday, February 25, Mbadi disclosed that the government had increased the fine from Ksh500,000 to Ksh2 million for digital lenders who violate the Banking Act.
The CS issued his response after being pressed by the Senators, who demanded that the state protect Kenyans from lenders who impose high interest rates, violate data privacy, and institute brutal loan recovery measures.
“We have enhanced the penalty for violations and failure to comply with the provisions of the Banking Act and any other regulations and guidelines, from Ksh500,000 to Ksh 2 million shillings to be dissuasive and instil discipline among non-deposit-taking credit providers,” Mbadi stated.
However, the CS maintained that the responsibility of addressing concerns about violations of customers’ data lay within the jurisdiction of the Office of the Data Protection Commissioner.
Senator Moses Kajwang’ questioned Mbadi on what measures the government had taken on lenders whose interests on the loans were more than double the principal amount.
“The credit lenders need to have their pricing module approved to ensure they follow the duplum rule in accordance with Section 44 of the Banking Act,” the CS responded.
Mbadi further confirmed that the Ministry and the Central Bank of Kenya would clamp down on microfinances offering logbook loans at high interest rates.
“There are people who offer credit facilities and take logbooks with the sole objective of selling these assets because they know that their debt structure undermines the servicing of the loans. Now, they must operate within the law, and if they do not operate within thelaw, they can even have their licences revoked,” he reiterated.
The CS rejected a bid by the Senators to have the Ministry and the CBK institute laws to have standard lending rates in the banking sector.
He argued that it was nearly impossible to impose interest rates on the banks and that it would have a negative ripple effect on the economy.
“If we control interest rates, you discourage investment in your country, and you are making your country uncompetitive, and the credit rating of your country will go down.
