Have you ever been at a verge of taking loans from mobile money lenders, micro finances and money lending apps? At some point, we may have found ourselves using Branch app, Tala, Mkopo rahisi among other mobile money lenders such as Mshwari and KCB Mpesa. All these are short term money lenders, and good news might have just come!
All formal and informal short term money lending entities will soon be under control of the Central Bank of Kenya if Members of Parliament approve a Bill by Kesses MP Swarup Mishra.
Mishra has already written to Speaker of the National Assembly of his intention to introduce a Bill to cap interests that are charged by micro finance or other money lending set-ups.
The proposal, according to Kesses MP will bring sanity to the informal set-ups which he claimed charges way above the recommended CBK rates.
In July this year, Kenyans had reprieve after Central Bank’s Monetary Policy Committee revised downwards the lending rate by 50 basis points to nine percent from 9.50 percent.
The development means Kenyans can access loans at cheaper rates as the maximum interest rate banks will charge on loans dropped to 13 per cent from the previous 13.5 per cent set in March in line with the interest rate cap law.
Banks are normally not allowed by law to charge more than 4 per cent interest above Central Banks lending rate.
According to Mishra the informal set-ups levy up to 20 percent monthly translating to 240 percent per annum.
“I believe such legislation would protect our citizens who result to seeking this short term solutions because of dire need for financial assistance and are unable the much needed loans from banks or other institutions that offer loans within the bracket of the CBK guided lending rates which are currently oscillating between 12 to 14 percent per annum,” argued the Kesses lawmaker.
The MP noted Kenyans have suffered over the fluctuating interest rates charged by informal institutions adding it is time the mess is rectified through legislation.
“It’s our Government constitutional obligation to protect our citizen from being exploited by these institutions which end up attaching and auctioning the security offered by these needy citizens and disposing them at a fraction of their value,” he says.