REGULATORY CHALLENGES IN RESPECT OF PREDATORY LENDING PRACTICES IN KENYA
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Keywords:
Predatory Lending Practices, Formal Lenders, Informal Lenders, Digital Lenders, Financial Inclusion, Financial LiteracyAbstract
Predatory lending, and its control, has historical origins. Despite the many years of attempts to control it, it still exists. It takes both the traditional forms and new evolving ones. Global trends demonstrate a widespread attempt at regulation.
There is unprecedented proliferation of predatory lending practices in Kenya, in the same way it is happening elsewhere. These practices are associated with all lenders; the formal and the informal, the traditional and the digital. Several factors have been identified as leading to this prevalence. These include financial illiteracy, a culture of subsistence economy, poverty, prudential and regulatory hurdles and technological advancements.
Legal and regulatory challenges exist and therefore the consumer remains unprotected. These challenges are mainly brought about by gaps in the law, informalism in the financial sector, deficiencies in financial inclusion and an uncoordinated consumer protection framework.
There is therefore need for regulatory measures to be undertaken to address this challenge. These include the promotion of financial literacy, placing financial inclusion at the centre of legal reform and the reform of consumer protection legislation. Regulators should not rush into formalisation as it may lead to undesired results. There is need to have access to financial services recognised as an important facet to human development.
This paper is an attempt at discussing those challenges, and eventually proposing reform measures. The intended result is that lending services will get to the intended consumers, but with enough safeguards for their protection.
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