Kenya, March 5 -- Consumer complaints against digital lenders saw the sharpest increase in cases filed at the Competition Authority of Kenya (CAK) in the year leading to June 2024, reflecting continued breaches of lending regulations.
The CAK's annual report for 2024 shows that financial sector complaints rose to 197 out of 668 cases (29.5 percent), up from 100 out of 521 cases (19.2 percent) in the previous year.
Digital lenders were identified as the biggest offenders within the sector, accounting for 63 cases in 2024, up from 16 the previous year. Microfinance institutions followed with 57 complaints, rising from 44.
Issues raised against digital lenders included excessive interest rates, non-disclosure of terms, unilateral contract changes, and aggressive debt collection methods, including harassment of borrowers' contacts.
Despite the Central Bank of Kenya (CBK) implementing the Digital Credit Providers (DCPs) Regulations in 2022 to curb such malpractice, predatory lending and consumer mistreatment persist.
The popularity of digital loans contributed to the proliferation of over 400 lenders in the market, but recent CBK disclosures indicate that only 85 were licensed by October 2024, with many others either awaiting approval or operating illegally.
It's clear things are getting worse, not better, for ordinary Kenyans trapped in debt. With over 400 lenders operating and only 85 licensed, where's the oversight? Ruto's government promised economic empowerment, but these unchecked practices suggest a lack of control and accountability. How much longer will hustlers bear the brunt of this chaos?
"These loan services will give you a loan; before even the loan is due, they start spamming your phone with messages of insults," a Client reveals.
"On the interest part, you borrow 12k; they give you 7k and expect you to pay back 12k within 7 days."
Published by HT Digital Content Services with permission from Bana Kenya.