NAIROBI, Kenya, June 14 – Digital lending in Kenya has been rising, offering affordable and easy access to credit through technology.
Its popularity has attracted both young and old people because it offers seamless services.
To regulate the sector, the Kenya Revenue Authority (KRA) required all operators in the country to be registered as Digital Credit Provider (DCP).
Capital Business had a sit-down with Tala’s interim General Manager and this is what she had to say:
Recently, Tala received a license from the CBK as a DCP. How important is the DCP license for the digital lender?
As we move into this new phase of the industry, DCP licensure acts as a stamp of approval for lenders looking to operate in this market. With over 300 lenders in an unregulated market in the past ~8 years, the new regulations are great to ensure consumer safety remains at the forefront.
What does the DCP license mean for the company?
For Tala, our operating guidelines remain largely the same as we had already been at the forefront of responsible lending practices in Kenya. The bigger change that we anticipate as a business is as a result of new compliance reporting requirements which come with regulation.
Why did it take so long for Tala to get its DCP license?
Taking the expansiveness of the sector and with over 300 applications at the Central Bank, it is evident why this process will have to be more of a continuous process. More importantly, as per the implementation guidelines, all lenders who submit their applications are allowed to continue operations while awaiting application review to allow for this transitionary period.
How will the DCP license help streamline the industry as more lending apps enter the Kenyan market?
We believe that when properly implemented by the Central Bank of Kenya – CBK , this will ensure the ongoing flow of responsible credit to Kenyan consumers and small businesses as we pursue our shared goals of
First, advancing a much safer operating environment for Kenyans with responsible lending practises at the forefront. We know that consumers are using more than one digital lender as per the Geopoll survey of 2020 that surveyed 1000 people
Secondly, cementing Kenya’s global leadership in financial inclusion and innovation.
In your own experience, will the CBK license increase customers’ confidence in lending apps that are coming up left right and center?
We are seeing customers becoming more aware of this as a factor when selecting a lender as per the 2023 Tala MoneyMarch report, right behind loan terms and customer service which is relatively new to this market. With 32 lenders being licensed so far, we anticipate that this will increase customer consideration for these products.
How has digital lending space in Kenya evolved over the years?
The industry is clocking 10 years soon and I would say that this first phase of the industry did a lot to increase access to credit to unbanked populations in Kenya.
Starting with market pioneers such as Tala in 2014, we now have over 300 players in the market, and are actively entering the next phase of the industry under the new regulatory regime.
This next phase will be marked by customer-centric innovation, with consumer needs being at the center of new innovations that achieve success.
Lately, Kenya has seen the entry of numerous lending apps into the country. Won’t this create competition for players like you?
The credit deficit for MSMEs alone stands at over $19 billion in Kenya. The need for credit is not yet met and there remains to be massive opportunity for current and new players, and especially among peri-urban and rural populations.
What are some of the challenges that you are currently facing?
Economic hardship among our customers continues to be top on our list of challenges we continue to anticipate this year, and its impact on users’ ability to repay loans and general engage with financial services.
