Senate Deputy Speaker Kithure Kindiki has tasked the committees on ICT and that of Finance and Budget to jointly scrutinise a statement filed by Narok Senator Ladema ole Kina, asking the committees to inquire and report on various aspects of financial services being offered by the telecommunication firms.
Banks have been quietly pushing for tighter regulation of the mobile money space, arguing that lighter rules had enabled the telcos to offer services at a much cheaper rate and higher speed than they can.
The telecommunication firms have, however, argued that tighter regulation will stifle innovation, roll back the gains made in deepening financial inclusivity as well deny customers the efficiency associated with mobile money.
The National Assembly’s Information, Communications and Technology (ICT) committee chaired by Marakwet West MP William Kisang early this month directed the CBK to publish regulations that will see interest rates charged by more than 500 unregulated digital micro-lenders controlled by the banking sector watchdog.
The team asked the banking regulator to ensure the digital lenders are guided by the control on cost of loans introduced in 2016 within six months of adoption of the report.
Mobile money firms and microlenders are currently allowed to skirt a legal cap on cost of loans at four percentage points above the central bank’s benchmark rate.
“The interest rates should be those applicable to commercial banks for standardisation,” the committee said in a report tabled in Parliament.
The proliferation of lenders using mobile money technology to extend credit to the banked and unbanked alike has saddled borrowers with high interest rates.
Their entry was in response to a rise in demand for quick loans and the freeze in commercial bank lending to individuals and small business, which followed the capping of interest rates in 2016.
The lenders, who are charging borrowers annualised interest of between 18 percent and 200 percent, have tapped into a market that has become more lucrative than mainstream banking where lending rates are capped by law at 13 percent. The list of seasoned players in this market includes Letshengo, Tala, Izwe and Branch, while new market entrants include digital lending platforms such as Nairobi Securities Exchange-listed firm Car & General.
Mr ole Kina also wants the Senate ICT committee to issue a report on the protection of consumer data by telecommunication companies.
“The committee should explain the regulatory framework for financial transactions including loans and promotions transacted through mobile telecommunication companies,” he said.
He also wants to know whether the interest charged on loans and other credit facilities advanced to customers by or through mobile companies adhere to the law on interest capping.
The Senate’s ICT and Budget committees will inquire into safeguards to ensure lending services by telecommunication companies do not bring down the economy in case companies collapse or shut down.
“The committee should state whether financial services being offered by the telecommunications companies can be delinked from those companies and registered as financial companies,” Mr ole Kina said.
He also wants to know whether measures have been put in place to ensure consumer data obtained by the mobile telecommunication companies and other companies using the mobile platform for financial promotions don’t fall in the hands of criminal entities or being used for identity theft.
“The committee should explain whether mobile telecommunication companies can set up a mechanism to alert mobile phone users when their national ID numbers are used to register a new phone number,” the Narok lawmaker said.
He is also seeking to know if mobile telecommunication companies and third parties such as banks have a safe data-sharing platform between each other for protecting the consumers, such as reversal of erroneous financial transactions.