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