Kenya: Central Bank of Kenya Exposes Unlicensed Auto Financing Firms

The Central Bank of Kenya (CBK) has disclosed that five prominent companies providing vehicle, motorcycle, and asset financing to low-income individuals across the country are operating without proper authorization.

This revelation is likely to draw attention to regulatory oversight and the absence of an effective customer protection framework in the country. The identified lending firms, backed by global venture capital, have expanded their operations nationwide, generating millions in profits from lending to low-income borrowers.

These lending firms face scrutiny for engaging in predatory lending practices, with numerous customers expressing concerns about the exorbitant interest rates, resulting in payments exceeding the initial cost of the financed goods.

The firms operating unlawfully include Momentum Credit Company Ltd (MCL), Mogo Credit, Watu Credit, Progressive Credit, and Tugeende. These credit providers have capitalized on the demand for quick loans among Kenyans.

CBK Governor Kamau Thugge stated, “Momentum Credit Ltd applied to CBK to be licensed as a Digital Credit Provider (DCP). MCL’s application has not yet been processed – the institution has not fulfilled stipulated license requirements.”

Although Momentum is not licensed as a microfinance bank, it reported a profit after tax of Sh139 million in 2022, showcasing its lucrative activities. Its total assets reached Sh2.4 billion as of December 31, 2022.

During a Senate Standing Committee on Finance and Budget inquiry, Dr. Thugge addressed the regulator’s actions to protect borrowers and emphasized the need for sector regularization to safeguard Kenyans from predatory lenders.

Dr. Thugge disclosed that Mogo and Progressive have been operating without a license, and while they have submitted license applications to be recognized as digital credit providers, they are not currently licensed under the CBK Act and DCP Regulations, 2022.

He further noted that Tugeende and Watu Credit have neither applied for licenses nor received approval to conduct digital credit business, as required under the CBK Act and DCP Regulations, 2022.

The CBK expects digital credit providers (DCPs) to submit pricing models aligned with legal provisions. Dr. Thugge emphasized ongoing engagement with licensees to ensure compliance with the law in terms of pricing models, product features, and prices.

As customer complaints continue, the implicated firms have announced expansive initiatives, with Mogo revealing plans to provide credit worth Sh7 billion to small businesses and individuals engaged in income-generating projects. Momentum Credit, a non-deposit-taking financial institution, has also pursued an expansion strategy.