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{
"id": 1561177,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1561177/?format=api",
"text_counter": 429,
"type": "speech",
"speaker_name": "Molo, UDA",
"speaker_title": "Hon. Kuria Kimani",
"speaker": null,
"content": "All the nominees displayed zeal to strengthen the Central Bank's regulatory and oversight role, enhancing financial stability and supporting Kenya's economic growth. In recent years, the global financial landscape has witnessed rapid innovation, particularly in the realm of blockchain technology, virtual assets, and cryptocurrencies. These technologies are shaping traditional banking models and introducing new regulatory and security challenges. It is therefore important that, as this House approves these four nominees, they need to update the Central Bank of Kenya systems to make sure that they are cognisant of the use of blockchain technology. They need to leverage on use of virtual assets and cryptocurrencies, including making sure that the Virtual Assets Bill in this House, is well up to date with best practice. They need to ensure that they do risk checks and ensure that there is no collapse of these particular systems. They also need to guide the bank on policy and regulatory considerations and make sure that they use up-to-date technologies to advance the issue of cybersecurity and innovations. In the last few years, the traditional banking sector has changed. For a very long time, Kenyans relied on banks and bank products in the traditional way of banking. But of late, for example, you have seen an uptake of digital loans now accounting for 52.79 per cent of all active loan accounts with a total outstanding balance of Ksh158 billion. Loans like Fuliza, that overdraft facility under M-PESA, disbursed Ksh834 billion in the last 12 months as of March 2024 which averaged Ksh2.3 billion daily. Other products like KCB M-PESA, and M-Shwari disbursed Ksh83.7 billion and Ksh42 billion, respectively. However, despite this growth, although credit platforms provide great convenience and are easily accessible within a very short period of time, especially to those outside formal employment, the interest rates on these platforms remain very expensive. I have done a small analysis of the interest rates, and I will just give an example of KCB M-PESA. When you hold a KCB account and take a digital loan, the interest rate is 7.5 per cent per 30 days on amounts between Ksh50 and Ksh1 million. The repayment period is 30 days. When you calculate the effective annualised interest rate, it comes to 130 per cent. If you take M-Shwari loan, the product by NCBA Bank and Safaricom, at 7.5 per cent for 30 days, they offer loans from Ksh100 and Ksh1 million, which brings an annualised rate of 130 per cent. If you take another product, the MCo-op Cash App, which is available to most Members here with Cooperative Bank accounts, they charge between 8 and 12 per cent for a period of 30 to 90 days. They will offer you between Ksh1,000 and Ksh500,000, with a repayment period of one to three months. The annualised interest rates, taking the spread between 8 and 12 per cent, range from 107 and 207 per cent per annum. Therefore, the Central Bank of Kenya, which should supervise and ensure that interest rates remain affordable to Kenyans, should not just focus on products within the traditional banking system. The access to digital loans, especially with our commercial banks, emphasises the need for Central Bank of Kenya (CBK) to go out of its way to ensure that interest rates remain affordable. We cannot have a situation where when seeking to secure a loan with a log book you are charged interest rates between 12 and 20 per cent, but the same loan offered through a digital platform, which actually incurs less cost for the bank, ends up with an effective interest rate of up to 100 per cent or more. In fact, if I went through the list further, you would see some of them exceed 300 per cent. The challenge for this Board of Directors is to view the banking sector not just as a traditional banking system, but to take into consideration the digital space, cryptos and blockchain technology staying up to speed rather than being reactionary. Some people have lost their monies through some of these platforms, like one of the cryptos that collapsed last The electronic version of the Official Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Hansard Editor."
}