Owners and top officials of digital lenders will face audits after the government introduced new rules of special vetting to curb fraud and money laundering in the lucrative business.
New rules published by the Central Bank of Kenya (CBK) will conduct lifestyle audits of significant shareholders, directors, chief executive officers and senior managers on their debt status, criminal record and tax payment history.
The CBK said it would require a certificate of good conduct, tax compliance certificate and credit reference bureau report for each of the digital credit providers’ owners and senior officials as a precondition for licensing.
Additionally, the digital lenders are required to present anti-money laundering and combating financing of terrorism policies and procedures and data protection policies and procedures.
The apex bank also changed a requirement that lenders should provide details on corporate bodies proposing to have a significant shareholding in them.
The regulator further wants lenders to provide “a description and evidence of sources of funds to be invested in the applicant,” terms and conditions of credit products and services a lender intends to provide.
CBK said the regulations seek to address concerns raised by the public relating to the predatory practices of the previously unregulated lenders, particular high costs, unethical debt collection practices and abuse of personal information.
The lenders will from September be required to disclose the total charges for their loans, including interest rates, late payment and roll-over fees, before disbursing credit to customers.
The requirement to disclose hidden charges is part of the conditions for fresh licensing of the digital lenders.
CBK will have powers to revoke or suspend the licences of digital lenders who do not disclose full information on loan facilities to borrowers in line with the consumer protection law.
