(Nairobi) – Kenyan lawmakers have initiated public consultations on proposed laws to regulate predatory digital lending practices, especially affecting boda boda operators.
Kenyan Members of Parliament have started the process of addressing concerns over exploitative practices in the digital lending sector, particularly those tied to the “Buy Now, Pay Later” (BNPL) credit model. This model has become increasingly popular in Kenya, offering borrowers easy access to assets while often trapping them in financial hardship.
The National Assembly’s Finance and Planning Committee is spearheading three proposed Bills aimed at amending current laws governing digital lending. These are the Tax Laws (Amendment) Bill 2024, the Tax Procedures (Amendment) Bill 2024, and the Business Laws (Amendment) Bill 2024.
The legislative process was prompted by a petition from boda boda operators, who raised concerns about predatory practices within the BNPL sector. Kigumo MP Kamau Munyoro, a member of the finance committee, highlighted the case of a constituent who lost a motorcycle despite having repaid KSh 250,000 on a KSh 260,000 loan.
“I questioned how someone could pay so much and still lose the bike. When we summoned these companies, we discovered they operated without proper regulations and set their own interest rates,” Munyoro said.
The Bills aim to address consumer protection by proposing strict licensing requirements for all non-deposit-taking credit providers, bringing them under the supervision of the Central Bank of Kenya (CBK). This regulation would enforce a standardized code of conduct and ensure transparency in the sector.
| Proposed Protections Under the Bills | Key Measures |
|---|---|
| Licensing of non-deposit-taking credit providers | Amend the Central Bank Act to require licensing by CBK. |
| Consumer rights | Ensure transparency on loan terms, financial costs, and data confidentiality. |
| Prohibition of harassment | Ban lenders from using abusive, threatening, or profane language during debt recovery. |
The Business Laws (Amendment) Bill 2024 further seeks to protect borrowers from unregulated lenders by setting conditions for micro-loans and defining the rights and duties of both lenders and borrowers. It also includes penalties for lenders who fail to comply.
If passed, the new regulations will tighten operations for digital lenders, with enforcement from both the Central Bank and the Office of the Data Commissioner. Lawmakers hope the changes will end practices that exploit vulnerable borrowers, such as boda boda operators who often finance their motorbikes through BNPL schemes.
“In the course of debt collection or loan recovery, a non-deposit-taking microfinance business shall not harass, abuse or oppress a borrower or guarantor, threaten or use violence, or use obscene or profane language,” the proposed legislation states.
The public participation phase will incorporate views from stakeholders across Kenya, ensuring the final law reflects the needs of the people while maintaining economic fairness in the digital credit market.