Kenyan lawmakers are starting an investigation of digital credit apps, which one member of the National Assembly called a "social menace” that has destroyed many livelihoods.
The probe will be conducted by the Finance Committee after a petition from Anthony Oluoch, the representative for a constituency in the capital, Nairobi. He said that the dozens of mobile phone lending apps that have sprung up in Kenya in recent years need to be regulated.
"The digital borrowing has become a social menace responsible for suicides, divorces, family breakups,” Oluoch said in his petition to Parliament. "The lenders lure and trap borrowers into unnecessary borrowing and a vicious cycle of expensive loans by raising loan limit upon repayment of the initial loan.”
Over the last few years, millions of Kenyans have downloaded loan apps, some of them developed by US companies. Most of the customers had never borrowed from a bank before. The apps charge interest rates that often exceed 100% annualised, and many Kenyans are struggling to repay their debts, as Bloomberg Businessweek reported last month. Nearly one in 10 adults in the country have defaulted on a digital loan.
The committee’s report is due in 60 days. Oluoch wants the National Assembly to direct the Central Bank of Kenya and the Communication Authority of Kenya to audit digital lenders. – Bloomberg