CBK regulations to streamline country's digital credit market

Tala Global Director Growth Annstella Mumbi. [File, Standard]

The country enacted the Central Bank of Kenya (Digital Credit Providers) Regulations 2022, setting up a major shake-up in the digital lending market.

With tight licensing requirements, the new rules will streamline the fast-growing sector and also protect consumers from rogue lenders out to exploit them.

Amid concerns of predatory lending, unethical debt collection practices and abuse of personal data pushing the banking sector regulator to rein them in.

Tala Global Director Growth Annstella Mumbi spoke to Enterprise on what the digital credit market will look like.

The rising cost of living is still a major issue among consumers today. How does this affect consumer behaviour?

We are seeing consumer behaviour change. In the just released Tala Money March Report, we saw consumers borrowing more, cutting out luxury (non-essential) expenses and saving more as we continue to anticipate harder economic times.

To this end, what is the business outlook for you for the rest of 2023?

As Tala, our focus remains to be on consumer-centric innovation, that is how to continue building for our users' needs and expanding beyond credit in our offerings.

You are one of the digital lenders now licensed by the Central Bank of Kenya (CBK). How does this position Tala in the marketplace?

We are seeing customers becoming more aware of this as a factor when selecting a lender as per the 2023 Tala Money March 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.

As a result of the regulations, digital lenders are few in the market now notwithstanding the hundreds whose licensing is still pending; now that the field is not as crowded, for those already licensed, what kind of business environment do you foresee?

First, it is important to clarify that all lenders 300 plus who applied for licences remain operational while pending licensure. Moving forward, we anticipate that a more streamlined market will allow for increased consumer safety which will in turn rebuild the broken trust among consumers.

What more do you expect to see the regulator (CBK) do to bring sanity into the digital lending space?

As a regulated entity, we are committed to continuing the close working relationship with our regulator as we explore further operationalisation of compliance under the CBK mandate.

We have always maintained that regulation is a good starting place to fix core issues in the industry and enforcement for those who deplete consumer trust will be key moving forward.

In your impact report, you noted an improved quality of life among consumers. How do you measure this?

We measure this as per our user needs for credit and how access to Tala has impacted their needs. The factors include improved access to finance, ability to purchase inventory and grow businesses, improved ability to afford household expenses and bills, and improved ability to save.

Lenders are pivoting towards risk-based pricing...

This is how we have historically operated as market pioneers for risk-based pricing. Our waiver of loans and fees was in line with other top market players in efforts to remain committed to supporting our customers through the challenges were facing especially with 70 per cent of our borrowing being for business reasons (most affected by the Covid-19 pandemic).

What are Tala's deliverable targets in the next five years in terms of impact, amount disbursed, and market share?

We are keen to triple our business in the next two years and are focused on unlocking core partnerships to enable this as we work to reach more Kenyans who need access to financial services.