There have been concerns that digital companies offering mobile loans are taking advantage of legal loopholes to exploit Kenyans and harvest personal data.
Reports by the government, Financial Sector Deepening (FSD), and the Bill and Melinda Gates Foundation show that dozens of apps operate with very little regulatory controls.
Recently, some of the companies involved in offering mobile loans came together to form the ‘Digital Lenders Association of Kenya’, (DLAK) whose aim is to clean up the digital lending sector and work with the government in establishing best practices for the industry from across the world.
According to Kevin Mutiso, the DLAK treasurer, digital lenders in the organisation sign and abide by a code of conduct.
“DLAK members abide by the strict entry and exit rules regarding data privacy,” Mutiso said.
When asked why the companies require data from Kenyans, he said: “Data is being used during the verification process as short-term loans are not collateralised, and the lenders must use alternative ways to create their credit behavior models and support financial inclusion for customers that do not have a CRB credit score.”
Lawmakers have fronted plans to regulate the use of Kenyans’ data that is harvested by digital companies.
Mr Mutiso says DLAK is working with the Treasury to create policies that control digital lending.
“Treasury is responsible for digital lending and under the medium-term plan III (2018-2022) there is a pillar for digital finance flagship project which DLAK has provided input to the steering committee responsible for drafting a digital finance policy,” he said.
A report by CreditInfo, released on December 3, 2019, indicates that banks still control the biggest part of the digital loans market.
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