Focus on Central Bank of Kenya’s new plan to combat loan sharks
As part of efforts to curtail some of the consumer breaches resulting from the activities of loan sharks, the Central Bank of Kenya has announced plans to hire a consultant that would spy on commercial and microfinance banks.
The consultant would specifically be looking out for lenders who false-advertise, incorporate hidden charges in their loans, lend recklessly and even collect bribes.
According to Business Daily, any lender[s] found liable to any of the above-mentioned breaches would risk having their operating licenses revoked. The directors of such banks would also be removed, even as fines would be imposed on both the banks and the workers directly responsible for committing the offences.
“The survey intends…to carry out a mystery shopping survey to confirm banks’ compliance with consumer protection guidelines. The consultancy will be limited to a period of three months from the date of commencement. The consultant will carry out mystery shopping visits in various institutions licensed under the Banking Act,” the Central Bank of Kenya was quoted to have explained.
Across Africa, loan sharks have become a menace. They seem to have perfected the mechanism of luring loan seekers with false advertising and then ensnaring them, whilst arbitrarily increasing interest charges and forcing debtors to pay hidden fees.
Some of these lenders even specialise in rights/privacy violations such as harassing the friends and families of debtors.
Interestingly, Kenya is not the only country that is making effort to combat the menace. Earlier this year, Nigeria launched a crackdown against some unscrupulous digital lenders who were found guilty of using similar deceptive and illegal tactics.
Loan sharks are predatory lenders who lend money to borrowers outside the law. The loans they give often come with high interest rates that are usually beyond the legal limit outlined by state law. And repayment of such loans are usually enforced with threats and humiliations.