Apple Store
Bill
Capital Markets Authority
CBK
Central Bank of Kenya
Financial Sector Deepening Kenya
Geoffrey Mwau
Google Play Store
Insurance Regulatory Authority
Kenya
Kenya National Bureau of Statistics
Ministry of Trade
Sacco Societies Regulatory Authority
Treasury

Watchdogs warn against illegal mobile loan apps

Five financial sector regulators have warned Kenyans against an increasing number of “unlicensed and unregulated” financial services and products, saying they pose huge risks.

The agencies, including the Central Bank of Kenya (CBK), the Sacco Societies Regulatory Authority, the Insurance Regulatory Authority, the Capital Markets Authority and the Ministry of Trade, said the services include pyramid schemes, credit and savings schemes and “fraudulent” mobile applications that are available on platforms such as the Google Play Store and Apple Store.

“Some of these products require payment of a registration fee,” they said in a joint statement. Some require members of the public to save before qualifying for a credit facility.”

“They promise unusually high returns with little or no risk or without disclosing the related risks.

“They may require recruitment of more clients to earn points and qualify for more benefits such as bigger loans,” they said.

More than one in four Kenyans —or more than six million people — have taken a digital loan, highlighting the pivotal role mobile lending plays.

A recent report by the Financial Sector Deepening Kenya, the CBK and the Kenya National Bureau of Statistics shows Kenyans turn to the digital micro-loans mainly for short-term working capital due to convenience.

“The findings suggest that digital credit has become a leading source of credit in Kenya and that it is mostly used to finance working capital and day-to-day consumption needs,” said the survey.

In May, the Treasury published a draft Bill on financial regulation, which for the first time covers digital lenders.

Its key aim is to ensure that providers treat retail customers fairly, it said. “We have a lot of predatory lending out here, which we want to regulate,” Geoffrey Mwau, director general of budget, fiscal and economic affairs at the Treasury said on May 25.

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