Google to ban unlicensed loan apps in Kenya as new rules take effect

Google’s new policy requiring digital lenders in Kenya to submit proof of license to operate in the East African country takes effect today. The policy aims to clamp down on rogue loan apps, which are pervasive in the country.

This means that only providers with licenses from the country’s pinnacle bank, the Central Bank of Kenya (CBK), will be listed on Play Store, Google’s digital distribution service.

Digital lenders whose applications are yet to get a green light from the CBK, and can produce evidence of the same, will also obtain Google’s interim approval, but it will only be valid for 45 days. Once this period elapses, the unlicensed providers will be required to resubmit the declaration form attesting that the approval from CBK is still pending.

A Google spokesperson told TechCrunch that if the application for license is rejected during the 45 days, interim approval will be immediately rescinded.

Google’s move to curb unregulated loan apps in Kenya comes in the wake of similar efforts in India, Indonesia and Philippines, where the providers are also required to have requisite permits from authorities that regulate the financial services sector to be listed on Play Store.

In Nigeria, Google requires the loan apps to have a “verifiable approval letter” from the Federal Competition and Consumer Protection Commission, which last year set rules that require loan apps to declare their fees and demonstrate how they receive feedback and solve complaints, among other requirements.

22 digital credit providers are licensed in Kenya out of 381

Only 22 digital lenders, including Tala, a PayPal-backed loan app; Pezesha, a B2B embedded lending platform; and Jumo, a fintech providing financial services including lending, have so far been licensed, out of the 381 that applied as per CBK’s update yesterday.

Kenya and Nigeria are major tech hubs in Africa, and have witnessed the proliferation of loan apps, offering quick unsecured personal or business loans. However, the lack of stringent regulations, and Google Play Store’s slack vetting process, have enabled the rise of rogue operators, necessitating authorities to take apt measures to protect citizens.

In Kenya, Google’s new policy follows a new regulatory environment that requires digital lenders to avoid the use of threats or debt-shaming tactics, including the posting of personal information on online forums, unauthorized calls and messages to customers, and access to their contact lists for purposes of coercion in case of default.

Loan apps collect borrowers’ phone data, including contacts, and demand access to messages to check the history of mobile money transactions — for credit scoring and as conditions for disbursing loans. Rogue lenders have been sharing some of the contact information with third-party debt collectors without prior consent.

As per Kenyan law, loan apps must reveal their pricing model, and disclose all the terms and charges to customers in advance, and are expected to notify the regulator before introducing new products or making changes to existing ones. They are further required to disclose their source of funds, and provide evidence of the same, as confirmation that they are not engaging in financial crimes like money laundering.