Unregulated digital lenders in Kenya will no longer be able to submit customer information to Credit Reference Bureaus.

Unregulated digital lenders in Kenya will no longer be able to submit customer information to Credit Reference Bureaus after a directive from the Central Bank of Kenya (CBK) effectively banned these service providers.

There are three CRBs licensed by the Central Bank of Kenya, including Metropol Credit Reference Bureau Limited, Credit Reference Bureau Africa (TransUnion) and Creditinfo Bureau Kenya Limited.

The CBK is understood to have received numerous complaints of the alleged abuse of customer data by digital lenders.

Consumers have accused lenders of messaging their contacts due to unpaid loans and of harassment.

Banks, including KCB Mpesa, Absa’s Timiza and Co-op Cash, that have initiated micro lending are automatically regulated, while independent players such as Branch, Tala and Okash operate out of the CBK’s jurisdiction.

The CBK said: “With immediate effect, CBK has withdrawn the approvals granted to unregulated digital (mobile-based) and credit-only lenders as third party credit information providers to CRBs. The withdrawal is in response to numerous public complaints over misuse of the CIS by the unregulated digital and credit-only lenders, and particularly their poor responsiveness to customer complaints.”

“Thus, unregulated digital and credit-only lenders will no longer submit credit information on their borrowers to CRBs” it added.

According to a survey by FSD Kenya on 23 digital lenders in the country, once a user accepts terms and conditions, the application has the authorisation to share data with third party entities. This gives the lenders to use the data to message a user’s contacts to compel them to pay their loans.

The ban means that the mobile lenders will have to use other means to evaluate an applicant’s credit standing.

Furthermore, the CBK has waived all negative credit listing for amounts less than Kshs 1,000 (US$10) due to the COVID-19 pandemic.

The CBK said: “A minimum threshold of Ksh.1,000 has now been set for negative credit information that is submitted to CRBs by lenders. Borrower’s information regarding non-performing loans of less than Ksh.1,000 will therefore not be submitted to CRBs, and borrowers that were previously ‘blacklisted’ only for amounts less than Ksh.1,000 will be ‘delisted’.”

The move is set to motivate small businesses who depend on daily borrowing from regulated mobile lenders, to keep their business afloat.