Crafting A Comprehensive Credit Policy For Digital Lenders Under The Central Bank Of Kenya (digital Credit Providers) Regulations, 2022

In an era where digital transactions govern the financial landscape, digital lenders have emerged as pivotal players. A well-structured credit policy not only safeguards the lender's interests but also ensures clarity and fairness for borrowers. Here is an overview of how a digital lender can formulate a credit policy that balances operational efficiency with customer satisfaction.

1. Scope of the Policy 

It is important that the policy outlines the terms under which credit is extended, including eligibility, application process, disbursement, repayment, and actions in the event of default.

2. The Borrower’s Obligations 

The policy should clearly provide for the borrower’s obligations including repayments.

3. The Lender’s Obligations 

The Lendor’s obligations including ensuring customer privacy and compliance with regulations.

4. Requirements for Credit Facility Request 

Prospective borrowers need to provide essential information such as full name, email address, phone number, and identification numbers. Accuracy and completeness of this information are crucial for the processing of any credit facility request.

5. Credit Facilities and Requests 

The lender reserves the right to approve or reject credit facility requests based on a comprehensive analysis of the borrower's creditworthiness, including business performance, repayment ability, and risk factors.

6. Eligibility and Background Checks 

These checks are vital in understanding the borrower's intentions and capacity. The focus is on ensuring that loans are used for business purposes.

7. Credit Risk Management 

Identifying and mitigating credit risks are fundamental for the lender's stability. Measures include thorough background checks and ongoing borrower performance monitoring.

9. Policy Measurements & Improvements 

The effectiveness of the credit policy should be monitored and assessed annually and recommendations for improvements made.

10. Policy Communication 

Communicating the credit policy effectively to all stakeholders is crucial. It should be accessible on digital platforms and incorporated into the Terms and Conditions of the lending service. 

In conclusion, a digital lender's credit policy is imperative particularly for its market reputation. 

The commercial team at CM Advocates LLP possesses extensive expertise in the regulatory framework governing digital credit providers, including the drafting of credit policies and other related policies.  

If you would like to consult on this article or any other legal issue, you may contact Maureen Odongo at modongo@cmadvocates.com or the commercial team through commercial@cmadvocates.com. 

You can also visit our website https://cmadvocates.com/en for more information about us and our services.