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OWEGI: Borrowers need vital lessons on pitfalls of mobile money lending

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Kenya does not have institutional and legal
Kenya does not have institutional and legal frameworks targeting the novel digital lenders. FILE PHOTO | NMG 

The African e-Commerce Week recently held in Nairobi provided a platform to discuss the importance of digital trade for Africa’s development and structural transformation. Different panelists spoke of its potential to generate benefits and opportunities that could empower and promote inclusive growth. Agriculture, MSMEs, women traders and the youth were identified as potential gainers. With regards to digitisation, Kenya was singled out as a global benchmark in the advancement of mobile money technologies for broader financial inclusion.

Dating back to March 2007, mobile money platforms in the country have provided financial services to the unbanked, made it easier to transact business as well as conveniently pay utility bills. At present, mobile money lending services is the latest innovation in the arena with numerous applications offering instant loans which are disbursed via mobile money.

These mobile money lending applications or so called loan apps have made it faster and easier for customers to borrow unsecured loans with varying repayment periods and interest rates.

The loans, if put in the right use, can enable a small-scale trader acquire business stock; assist a parent to take care of a medical emergency; or fund an unexpected trip among many other examples.

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Despite these gains, Kenya does not have institutional and legal frameworks targeting the novel digital lenders. Are they, for instance, classified as commercial banks, non-banking financial institutions or micro finance providers or private lenders? In light of the growing competition by various players to lend out money digitally to customers, a clear cut categorization would determine which specific regulations would be applicable to them.

Serious consumer issues also arise out of these facilities as many of the borrowers are able to access simultaneous loans from different mobile lenders. This leads them into a debt trap. Furthermore, disclosure of the total cost of credit and terms and conditions of the loans are usually not clear to the digital borrowers who select “I Agree” without necessarily reading them.

Consumers therefore make uninformed decisions when they apply for the loans and suffer the consequences associated with the burden of servicing the repayments. Many borrowers have been adversely listed in credit reference bureaus as a result, thus, locking them out of future loans from other mobile lenders as well as more established financial institutions.

The Draft Financial Markets Conduct Bill, 2018 seeks to address some of these challenges arising from the adoption and usage of mobile money lending services.

Specifically, Section 51 of the Bill sets the ground for lender-borrower relationships and compels the former to accord fair treatment and provide and full information to their customers with a view to avoiding over-indebtedness and multiple borrowing. Nonetheless, the Bill does not have any clauses on mobile money lending platforms.

COLLINS OWEGI, Programme officer, Consumer Unity and Trust Society.

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World Bank pushes G-20 to extend debt relief to 2021

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World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.

“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.

He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.

The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.

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People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.

For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.

Debt burdens, already unsustainable for many countries, are rising to crisis levels.

“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.

ALSO READ:Global Economy Plunges into Worst Recession – World Bank

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Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans

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The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.

“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”

According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.

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Tighter Reins on Platforms for Mobile Loans

The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.

Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.

Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.

SEE ALSO: Central Bank Unveils Measures to Tame Unregulated Digital Lenders

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Scope Markets Kenya customers to have instant access to global financial markets

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NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options. 

This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.

The Scope Markets app offers clients over 500 investment opportunities across global financial markets.

The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.

The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).

The platform also offers an enhanced client interface including catering for those who trade at night.

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The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour;  Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).

The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.

Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”

He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.

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