Digital Lending Regulations Should Spur Innovation

I&M Bank CEO Kihara Maina believes that regulation targeting digital credit platforms should address adversely priced credit without limiting innovation.

Speaking during My Chat with a Bank CEO live event, Kimani said that the platforms possesses the transformational power to provide credit and promote financial inclusion.

My Chat with a Bank CEO is a forum by Kenya Bankers Association where Bank CEOs engage social media users. Today’s Chat focused on credit scores and access to credit.

Credit score

Digital credit platforms use innovative ways to assess the credit profile of the borrower combined with traditional scoring methods. An example of a new way of assessing credit profile is the use of social media presence to determine ones riskiness.

Banks are harmonizing their inhouse credit scores with credit reference bureaus to ensure risk-based pricing and differential pricing for borrowers.

Kimani says that a customer’s credit score is determined by:

• Payment history, for example do you pay your rent on time, electricity bills
• How much of your credit limits you are utilizing, so if you have a low usage of credit limits that is better for your score
• How frequently do you look for new credit? So don’t borrow from bank X online and then go to bank Y soon after
• Your credit history, how long have you been using credit

It is therefore important that any kind of regulation mooted for digital credit addresses the social issues that come with unfettered and perhaps adversely priced credit without limiting innovation and its power to open up financial access

I&M Bank CEO Kihara Maina

Access to credit

Utilizing digital technology will enable the banking sector to enhance access to credit. Mr Kimani believes that banks have a lot to do to get into digital lending.

He poses, “Consider that there are 300,000 credit cards issued in the industry compared to the millions seeking digital loans”.