Central Organization of Trade Unions (COTU) boss Francis Atwoli on Tuesday, November 9 became the latest voice to advocate for stricter regulation of digital finance services including Safaricom’s Fuliza.
Atwoli cited petitions from numerous COTU members on the apps which have been accused of predatory lending with high interest rates, debt shaming and other unethical practices. The trade unionist called for a crackdown on the digital microfinance sector in Kenya by the Central Bank of Kenya (CBK) and the National Assembly.
“With most banks having their interest rates between 12% to 14% per annum, most of the digital lending facilities have interest rates of between 70% to 500% per annum. Just to mention a few, Fuliza by Safaricom, which has pushed many Kenyans into owning more than one sim card from the same mobile operator, has an interest rate of 1% per day and more than 360% p.a.”
“Other mobile lenders have an interest rate of 25% after every two weeks while others 33% for every week. This is ridiculous and unacceptable and no amount of ‘risk factor’ can substantiate this kind of banditry,” he stated.
Former United Nations Council on Trade and Development (UNCTAD) Secretary-General Mukhisa Kituyi, a 2022 Presidential aspirant, has made regulating the digital finance sector a key part of his platform. He thanked Atwoli for “joining the campaign against extortion by micro finance institutions in Kenya.”
“The rise of digital micro finance is bankrupting poor Kenyans. With a minimum of 72% interest p.a. it is transferring the earnings of the poorest to the shareholder value of the richest. Central bank and CSR should stop this extortion forthwith,” Kituyi had earlier opined.
Atwoli sought to appeal to Central Bank Governor Patrick Njoroge to rein in the digital lenders exploiting Kenyans. He described the practices of digital lenders as illegal, immoral and ungodly.
“It is immoral for anyone to take advantage of the tough financial situations that Kenyans are going through to reap maximum benefits,” he asserted.
The Central Bank (Amendment) Bill, 2021, which was approved by the National Assembly Finance and Planning Committee in August seeks to place digital lenders under the ambit of CBK much like banks and micro-finance institutons, allowing CBK to regulate among other things, pricing of digital loans, sharing of borrowers’ information and management of digital lending firms.
Atwoli urged Parliament to come up with legislation “to facilitate the crackdown on the rogue digital microfinance sector in Kenya”.
Sourced from Business today