Curb predatory lending

Mobile phone loans, which are easy to access, have become a nightmare for many borrowers, with some lenders resorting to extortion after imposing exorbitant interest rates and high charges.

There has been a public outcry over the crooked lenders taking advantage of the desperation of poor Kenyans. This is why a plan by the National Assembly to tighten laws on the lenders is a godsend.

Rogue digital lending apps have turned convenient credit into a terrible crisis by using debt-shaming and data abuse to extort money from borrowers. While the instant mobile lenders provide emergency funds to millions who cannot access bank loans, the lack of compliance by some unlicensed platforms has fuelled severe extortion.

Whenever borrowers delay repayment by even a few hours, the predatory lenders swing into action. Their agents often send threatening text messages to family, friends, and employers to shame them into paying. On top of their high interest rates, they also charge daily penalties that triple a tiny loan in just a few weeks.

It is commendable that the financial authorities are already cracking down on these illegal operations and banning debt-shaming.

The parliamentary proposal also seeks to protect borrowers from hidden charges. If passed, the lenders will have to fulfill certain conditions before being allowed to give out loans. They will be required to make a full disclosure of their charges and terms so that prospective borrowers know what they are getting into.

But even more important is the bid to subject loan recovery to court procedures as happens in civil disputes. Should Parliament pass this, lenders will have to give reasonable notice to borrowers before debt recovery.

To protect the public from the predatory non-deposit-taking microfinance enterprises, the draft proposal seeks full disclosure of loan terms and charges. This is a long-overdue bid that Parliament should quickly endorse.

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