Mobile Credit in Kenya and Tanzania: Emerging Regulatory Challenges in Consumer Protection, Credit Reporting and use of Customer Transactional Data

Abstract

The recent proliferation of mobile financial services in developing countries has increased access to financial services among underserved rural and low-income populations. Mobile credit is one emerging mobile financial service that allows consumers to quickly apply for and receive loans over mobile devices. Mobile credit services have achieved early success in Kenya and Tanzania, two mature markets for mobile financial services. While these new services have the potential to further promote financial inclusion, they also raise novel regulatory issues and do not fit neatly into pre-existing regulatory categories. This is due to the nature of mobile credit and the variety of entities and regulatory frameworks implicated in the business models found in these two markets. Policymakers and regulators will need to make choices about how to regulate mobile credit with respect to consumer protection, credit reporting and the use of mobile and mobile money services transactional data, a key input for credit evaluation decisions. These choices will need to take into account promotion of financial inclusion and protection of consumers while limiting disincentives for innovation and investment.