Senators Tuesday called for regulation of mobile phone-based lenders on claims they are saddling borrowers with high-interest rates.
The senators accused financial institutions offering mobile loans at rates above the cap provided in law and occasioning heavy borrowing and indebtedness mainly among the low-income groups on easy access to loans.
They gave the example of Fuliza overdraft facility, a new M-Pesa service that allows customers to complete transactions when they have insufficient funds in their accounts.
According to the lawmakers, the service has registered phenomenal growth since launch, raking in Sh6.2 billion after just a month, Sh29 billion within three months and Sh45 billion within six months of its launch.
They argue that the growth has been achieved through circumventing the law and charging interest at rates as high as 10 percent in a month which translates to 120 percent in a year.
Tala and Branch apps, each offered a month’s loan at 15 percent, equating to 180 percent over a year.
Both companies say rates drop dramatically as people pay back successive loans.
Introduced in 2016 to stop banks charging high-interest rates, the lending caps has stifled traditional bank lending, opening the market for the mobile application lenders.
“We have a lot of predatory lending out here, which we want to regulate,” said Geoffrey Mwau, director-general of budget, fiscal and economic affairs at the Treasury, told reporters on Thursday.
On Monday, Central Bank of Kenya governor Patrick Njoroge said mobile phone lenders have become predatory and are operating like Shylocks.
Nominated Senator Alice Milgo brought the matter to the floor of the House, demanding action from the State.