According to a report by the Financial Sector Deepening on digital credit in Kenya, app-based players can harness use of mobile phones, identity-linked digital footprints, automated credit scoring, agent networks and credit information sharing to deliver digital loans quickly and at a large scale. Due to high investment costs, together with the high risk of digital lending, the interest rates on digital loans are usually relatively higher than the industry average. There may be need for CBK to introduce guidelines and licensing of credit-only digital lenders so the consumer is able to identify credible institutions. Second, regulation must be balanced in the full recognition of the high risk faced by credit-only digital lenders. It would be imprudent, therefore, to introduce interest rate capping on credit-only digital lenders.

Source: The Star March 27, 2019 17:26 UTC