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Kenya: Govt. bars unregulated predatory digital lenders from blacklisting poor defaulters, a practice which has previously left the poor in a debt trap

"CBK bars digital mobile lenders f"from CRB listing"

The Central Bank of Kenya (CBK) has barred unregulated digital mobile lenders from forwarding the names of loan defaulters to credit reference bureaus (CRBs) and stopped the blacklisting of borrowers owing less than Sh1,000. CBK said delinking unregulated digital mobile lenders from CRBs was as a result of the public outcry over widespread misuse of the credit information sharing (CIS) mechanism.

Firms such as Tala and Branch have been locked out at a time when the bulk of accounts negatively listed are linked to mobile digital borrowers. Banks will also be blocked from listing defaulters with unpaid loans of less than Sh1, 000, enhancing the borrowers’ chances of being able to borrow more. “The withdrawal is in response to numerous public complaints over misuse of the CIS (credit information sharing) by unregulated digital and credit-only lenders, and particularly their poor responsiveness to customer complaints,” the regulator said in a statement...

Tens of unregulated microlenders have invested in Kenya’s credit market in response to the growth in demand for quick loans. Their proliferation has saddled borrowers with high interest rates, which rise up to 520 percent when annualised, leading to mounting defaults and an ever ballooning number of defaulters who have been adversely listed with CRBs.