Shylocks or Legitimate Lenders? An Inquiry into the Regulation of Digital Lending in Kenya

Abstract

The lending market in Kenya has seen a proliferation of digital lenders that are largely unregulated. The lenders provide seemingly cheap loans whose interest is huge when the Annual Percentage Rate (APR) is calculated. The lenders operate through apps that are uploaded to App Stores and pulled down at will. They require their customers to ‘accept’ terms and conditions before accessing the loans, and these terms sometimes allow the lenders unfettered access to customer data which they use and abuse in equal measure. The lenders use such customer data to threaten, to contact those on the contact lists of the customers’ phonebook, and to report them on Credit Reference Bureaus (CRBs). This paper seeks to examine the law on regulation of the digital lending environment in Kenya and to recommend the enactment of the Financial Markets Conduct Bill of 2018 which introduces elements of the Twin Peaks model of financial regulation. Key Words: Shylocks; digital lenders; data privacy; Annual Pricing Rate (APR); digital regulation; Twin-Peaks Model