A move by the Central Bank of Kenya (CBK) has lead to digital lenders cut there lending to 2 billion a month from the 4 billion they were lending before been kicked out of the Credit Reference Bureau (CRB).
Digital Lenders Association of Kenya (DLAK) chairman Kevin Mutiso said that the member firms where previously lending 4 billion monthly before the pandemic struck.
"We were extending credit averaging Sh 4 billion pre Covid but our went down by more than 50 percent in 2020 due to the government regulations put in place to regulate digital money lending after Covid-19 cases were detected in the country" Mr Mutiso said.
The association mentioned that around six million Kenyans borrow an average of 4,000 for a period to 30 days.
As a result of multiple borrowing and borrowing the funds for consumption, digital borrower are twice likely to default. The low value loans and short repayment have resulted to high rate of default and negative listing.
Mr. Mutiso said "Most borrowers initially were even borrowing with no intention to pay back"
He outlined that digital lenders had initially stopped offering loans in March and April but resumed later targeting only the borrowers who had a good repayment history.
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