Kenya has licensed ten finance companies to offer digital loans - this while the country’s financial regulator, the Central Bank of Kenya (CBK), looks to crack down on high interest rates, abuse of personal private information and unethical debt collection services for credit facilities offered through digital platforms such as via mobile phones and mobile money accounts.

There has been a surge of applications to provide digital lending services in numerous African countries, including Nigeria, Tanzania and Zimbabwe.

These services run on mobile applications, mobile money and USSD platforms. While convenient, authorities believe the technology is also used to breach the privacy of user data.

According to the Central Bank of Kenya, it has issued the ten licences having received 288 applications since March.

Those digital credit companies without permits are not allowed to offer digital credit services.

Digital lenders must now declare the source of their funds.

A statement released by the CBK reads, “CBK has received 288 applications since March 2022 and has worked closely with the applicants over the last six months in reviewing their applications. So far, 10 applicants have been licensed as Digital Credit Providers pursuant to the CBK Act.”

The ten licensed digital credit providers are all based in Nairobi and include: Ceres Tech Limited, Getcash Capital, Giando Africa Limited, Jijenge Credit, Kweli Smart Solutions, Mwanzo Credit, Mywagepay, Rewot Ciro, Sevi Innovation and Sokohela Limited.

Other applicants were said to be “at different stages in this process, largely awaiting the submission of requisite documentation”.

The CBK added: “The licensing and oversight of digital credit providers was precipitated by concerns raised by the public about the predatory practices of unregulated DCPs and in particular their high cost, unethical practices and the abuse of personal information.”

The CGAP (Consultative Group to Assist the Poor), a network of not-for-profit organisations focused on financial inclusivity, stated: “More needs to be done to protect consumers, and that a market slowdown in East Africa is needed to avoid a consumer digital credit bubble burst. A review of millions of loans and two large-scale customer surveys of digital borrowers reveal troubling issues with transparency and responsible lending that contribute to high delinquency rates, harming both consumers’ credit histories and lenders' business profits.”