Pwc-Dlak Comparative Study Report Printable 1

A Comparative Study on
the regulation of
digital lending
Final Report
February 2021
1 Executive Summary
This report was commissioned to assess various regulatory models adopted in 11 jurisdictions in relation
to digital lending with the intention of drawing insights as to possible regulatory approaches to be adopted
by Kenya. In this report, digital lending relates specifically to Business to Consumer (B2C) lending
services i.e. the advancement of small value loans provided by non-bank entities to retail consumers
through digital platforms.
The methodology was primarily desk-based review of various literature including review of the primary
legislation and the applicable subsidiary and ancillary legislation supporting the digital lending regulatory
framework in the following jurisdictions: Australia; Egypt; Uganda; India; Mexico; Nigeria; Poland; South
Africa; Spain; United Kingdom; and Singapore.
We undertook a comparative analysis of the lending laws (in so far as they might apply to digital credit) with the
aim of identifying different approaches that might assist in developing a consumer centric regulatory framework
for Kenya that would still encourage enterprise and innovation in the digital lending industry.
It is key to note that most countries do not have a specific regime for digital lending but rather regulate digital
lenders under one or more regulatory regimes, which broadly focus on consumer credit and finance.
This report highlights the various regulatory approaches adopted across the countries under review,
which can largely be grouped as follows:
• Supervision under national consumer credit laws e.g. Australia and South Africa;
• Supervision under microfinance or moneylending laws e.g. Egypt, Uganda and Singapore;
• Supervision under financial conduct or consumer protection laws e.g. UK, Poland, Mexico and
Spain; and
• Supervision under general consumer finance laws e.g. India and Nigeria
Most countries do not apply a single regulatory approach but rather operate a blend of the regulatory
models set out above. This is common, for example, in countries such as Egypt where a microfinance
regulatory model is in place – digital lenders are classified as non-deposit taking microfinance institutions
and are still required to adhere to consumer credit legislation.
Countries like Uganda, Singapore and Egypt have adopted a regulatory model which does not distinguish
between different types of non-bank lending entities. This approach seeks to regulate such lenders in a
similar manner regardless of their operating model i.e. loan disbursement via digital platform.
In a number of the countries under review, the regulator in charge of the regulatory regime is the central
bank (e.g. Nigeria, India and Mexico), while in some other countries the relevant regulator is a specialized
agency that is not the central bank (e.g. Uganda’s UMRA, the UK’s FCA, Australia’s ASIC and South
Africa’s NCR)1. In Poland, the supervisory mandate is vested in the regulatory agency that regulates
competition and consumer protection matters. This further illustrates the array of options available to
Kenya for regulating the digital lending sector, specifically, or consumer credit more generally.
Majority of the countries we reviewed had licensing as a core feature of the regulatory framework, which
implies that governments see licensing as an effective means of enforcing supervision in the financial services
sector. However, the cases of Poland and Spain illustrate that licensing may not be necessary where there is
an effective consumer protection regime that can be enforced against lenders by a supervisory agency such as
the consumer protection and competition regulator. This is particularly relevant to digital lenders which raise
funds privately rather than through deposits from consumers. The concern with using a licensing regime to
regulate a nascent industry such as non-deposit taking digital lending is that stringent rules on minimum capital
requirements, financial adequacy, reporting, local shareholding requirements and so on, would impose
significant compliance costs on participants. The majority of unregulated digital lenders in Kenya are start-ups,
which are funded by shareholder/investor funds.
1 Uganda – Uganda Microfinance Regulatory Authority; UK – Financial Conduct Authority; Australia – Australia Securities
and Investments Commission; South Africa – National Credit Regulator
2
Onerous compliance costs would affect the viability of these entities and they may not survive over the
longer term, which would stifle innovation and rob consumers of their products a convenient and reliable
means of accessing finance.
In light of the emerging nature of the non-deposit taking digital lending industry in Kenya, we would not
recommend a complicated licensing framework specific to the industry. In our view, a more appropriate
regulatory model would be one that enhances consumer protection through regulation of the conduct of
credit providers (digital lenders and others). This can be achieved through the development and
enactment of a consumer credit code that embeds the principles of consumer protection in lending. All
non-deposit taking providers of credit to the public, regardless of their business model, would be bound
by a set of consumer protection principles. We recommend that the enforcement of the consumer credit
code be vested in a regulator, which may be the Central Bank or another agency with a strong consumer
protection mandate (for example, the Competition Authority or a specialized consumer protection agency
similar to the NCR in South Africa). The code should provide for registration, but not necessarily licensing,
of consumer credit providers (including digital lenders) to make it easier for the relevant regulator to
monitor their conduct and take enforcement action in the event of a violation of the code.
Based on our study, some of the key consumer protection principles that should be embedded in the
proposed consumer credit code include: (i) transparency and fairness in dealings with consumers; (ii)
transparent pricing principles (iii) disclosure of key terms and conditions; ; (v) restrictions on certain debt
collection practices; (vi) credit information reporting; (viii) marketing guidelines for consumer credit
products; and (x) complaints handling and dispute resolution. A number of principles are already covered
in existing Kenyan laws (e.g. data protection and privacy laws, anti-money laundering and anti-bribery
and corruption laws).
With respect to dispute resolution, some countries have introduced administrative agencies to handle and
resolve consumer complaints against consumer credit providers. For example, Australia has established
the Australian Financial Complaints Authority (AFCA) while Poland and the UK both have Financial
Ombudsmen. We would recommend that such a dispute resolution mechanism be considered for Kenya
to assist with resolution of consumer disputes with consumer credit providers, particularly where the
disputes to not warrant more complicated and expensive dispute resolution options such as litigation. The
Ombudsman would liaise with the primary regulatory (e.g. the Central Bank) particularly with respect to
serious or sustained violations of the code by a consumer credit provider.
While we are comfortable that our recommended regulatory model would strike the appropriate balance
between promoting innovation and protecting consumers, we acknowledge that further detailed
consultations with a broad range of stakeholders (Parliament, National Treasury, Central Bank, DLAK,
COFEK and the wider public) would need to be conducted before a decision can be made regarding the
final regulatory model to be adopted.
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2 Table of Contents
1 Executive Summary ............................................................................................................................... 2
2 Table of Contents ................................................................................................................................... 4
3 Introduction ............................................................................................................................................ 5
3.1 Objectives ...................................................................................................................................... 5
3.2 Methodology .................................................................................................................................. 5
3.3 Limitations ..................................................................................................................................... 6
4 Situational Analysis ................................................................................................................................ 8
4.1 Overview of the digital lending landscape in Kenya ...................................................................... 8
4.2 Best practice principles for effective and efficient regulation ........................................................ 8
4.3 The gaps in Kenya’s digital lending regulation .............................................................................. 9
5 Comparative Study .............................................................................................................................. 11
5.1 Justification for countries selected .............................................................................................. 11
5.2 AUSTRALIA ................................................................................................................................ 12
5.3 EGYPT ........................................................................................................................................ 16
5.4 UGANDA ..................................................................................................................................... 19
5.5 INDIA........................................................................................................................................... 22
5.6 MEXICO ...................................................................................................................................... 24
5.7 NIGERIA...................................................................................................................................... 28
5.8 SOUTH AFRICA.......................................................................................................................... 31
5.9 POLAND...................................................................................................................................... 34
5.10 SPAIN.......................................................................................................................................... 38
5.11 UNITED KINGDOM..................................................................................................................... 40
5.12 SINGAPORE ............................................................................................................................... 44
6 Conclusion and Recommendations ..................................................................................................... 47
APPENDICES ............................................................................................................................................. 50
APPENDIX 1: List of Abbreviations ............................................................................................................ 50
APPENDIX 2: Glossary ............................................................................................................................... 53
APPENDIX 3: Summary of Comparative Study .......................................................................................... 54
APPENDIX 3: Comparative Cost of Credit ................................................................................................. 60
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3 Introduction
For purposes of this report, we have considered ‘digital lending’ to be Business to Consumer (B2C)
lending services i.e. the advancement of small value loans provided by non-bank entities to retail
consumers through digital platforms. Increasing access to credit is an essential aspect of Kenya’s efforts
to accelerate economic growth. Over the last several years, new digital lending platforms have provided
access to credit for those who were previously excluded from formal financial services. Those platforms
have proved to be popular as most Kenyans, prior to the introduction of digital credit, relied on informal
lenders and their social support system for low-value short term credit.
Digital credit involves limited in-person contact and leverages digital infrastructure.2 The product relies on
digital infrastructure to receive loan applications, determine creditworthiness of borrowers, approve the
loan, disburse the funds and receive payment. The loan amounts are typically low value and short tenor
(ranging from a few days up to a month).
The rapid growth of the digital lending sector in Kenya, particularly targeting low-income earners and micro-
enterprises, has resulted in public scrutiny of the business practices adopted by participants in the sector.
Concerns have been raised by the public, the Central Bank of Kenya (“CBK”) and policymakers regarding
inadequate consumer protection in and regulation of this sector. Consequently, there have been growing calls
to bring the sector under the regulatory oversight of the CBK, which has culminated in the publication of the
Central Bank of Kenya (Amendment) Bill, 2020 (the Bill), which was published on 19 June 2020. The Bill, in
part, seeks to bring all forms of digital lending under the mandate of the CBK. In the interim, pending enactment
of the Bill into law, the digital lending industry (other than lenders already regulated under existing laws such as
the Banking Act and the National Payment Systems Act) has largely relied on self-regulation coordinated
through the Digital Lenders Association of Kenya (“DLAK”).
The Bill seeks to introduce and amend some key definitions to the CBK Act. Essentially, these definitions
would expand CBK’s remit to regulate digital lending as financial products and services. The Bill also
proposed to empower CBK to regulate and supervise the providers of digital financial products and
services, providers of financial products and services as well as financial services in general.
The Bill has sparked debate regarding the regulation of digital lending and the optimal regulatory
approach to be adopted in order to provide sufficient consumer protection under law without stifling
innovation and financial inclusion in the low-income sector. This comparative study seeks to interrogate
the regulatory approach adopted across 11 countries in a bid to better understand the ideal approach to
be adopted in Kenya.
3.1 Objectives
This report assesses the regulatory approach adopted by various countries towards digital lending by
comparing aspects such as regulatory models, consumer protection, price regulation, dispute resolution
processes and data security standards.
The report is aimed at identifying ways in which the Kenyan regulatory framework can be improved
based on approaches applied in other countries.
3.2 Methodology
We primarily relied on a desk-based research of various literature including legislation and various reports
that have previously analysed digital lending regulation.
The report is divided into several sections:
2 The proliferation of digital credit deployments, Public disclosure authorized brief, World Bank 2016 - <
http://documents.worldbank.org/curated/en/830661467994632311/pdf/106035-BRI-PUBLIC-KNOWLEGDENOTE-Brief-Proliferation-
of-Digital-Credit-Deployments-Mar-2016-1.pdf>
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o Part 1 constitutes this introductory section (Introduction) setting out in brief the objective of the
report, the methodology used in preparing the report and the limitations qualifying the preparation
of the report.
o Part 2 sets out a situation analysis, which: (i) provides an overview of the digital lending regulation in
Kenya; (ii) sets out some best practice principles for effective and efficient regulation; and (iii) briefly
outlines the key issues identified in our review of the Kenyan digital lending legislation.
o Part 3 outlines the comparative analysis of the regulatory framework of select jurisdictions. This
analysis helps to inform some of our recommendations on how the regulation in Kenya with
respect to digital lending can be developed considering all stakeholders’ interests.
o Part 4 sets out our conclusions from the preceding discussions and analysis.
In undertaking our review, we identified a list of key factors to guide the comparisons we made
between the various countries in our sample. These factors were partly informed by the ITU’s
framework for optimal regulatory regimes for digital lending, which is set out in section 4.2 below. The
factors we considered, include:
o The type of Regulator;
o Licensing requirements (if any);
o Corporate structure requirements - legal form of the credit provider; minimum capital
requirements; local shareholding requirements; board composition;
o Pricing regulation;
o Credit information sharing;
o Marketing guidelines/restrictions;
o Debt collection restrictions;
o Consumer protection regulations;
o Dispute resolution mechanisms;
o Data protection and cybersecurity requirements; and
o Financial crime regulation.
3.3 Limitations
Our review was limited to the laws, regulations and regulatory guidelines prevailing (to the best of our
knowledge) as at the time of the review.
For the purposes of the comparative analysis, our review was limited to the following countries:
o Australia;
o Egypt;
o Uganda;
o India;
o Mexico;
o Nigeria;
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o Poland;
o South Africa;
o Spain;
o United Kingdom; and
o Singapore
We conducted a high-level review of the laws relevant to digital lending in these countries included in the
comparative analysis on an “as is” basis and for research purposes only. We do not represent ourselves
as experts in the interpretation of the laws of these countries.
Our report considers the fact that the review was limited in scope largely to a desktop review of the written
laws and surrounding literature. A more detailed review needs to be conducted to reconcile the written
law with the practice within the sector in each of the countries included in this study. This would involve a
detailed evaluation of the operations of the regulatory institutions established in each jurisdiction as well
as ancillary institutions materially impacting the provision of credit via digital channels.
This report was undertaken as a regulatory review assignment and the PwC team that authored it was
comprised of regulatory lawyers in Kenya3. Consequently, the focus of this report is primarily on
regulatory matters rather than on other aspects such financial, tax and commercial factors impacting the
digital lending sector, which are beyond the scope of the assignment. We recommend that for a detailed
review of these other areas, the Client engage the relevant financial, tax and commercial experts and
professionals. This report is subject to the qualifications contained in it and any liability in relation to our
review and this report is limited in accordance with the terms of our Contract.
3 Consultation was made with regulatory lawyers in Poland, Nigeria, Mexico and Spain.
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4 Situational Analysis
4.1 Overview of the digital lending landscape in Kenya
Lending to the public in Kenya has primarily been the preserve of the banking industry, which is heavily
regulated under the Banking Act, chapter 488 of the Laws of Kenya. Outside the banking sector, significant
credit has been channelled through regulated deposit-taking microfinance institutions (“MFIs”) and saccos,
regulated payment system operators (such as Safaricom Plc) and unregulated entities such as non-deposit-
taking MFIs and, more recently, unregulated digital lenders. For purposes of this report, it is important to note
that unregulated digital lenders in Kenya do not take deposits from the public but raise funds from private
sources which they then disburse as low value short term loans through mobile based platforms.
Under the Microfinance Act, 2006 non-deposit taking institutions remain unregulated in terms of a
licensing regime and only require a letter of no objection from the Central Bank of Kenya when setting up
operations. Over the past decade, the proliferation of non-deposit taking microfinance institutions has
been well aided by the availability of improved digital infrastructure. This has allowed such non-deposit
taking lenders to enhance their market reach and provide access to credit to a number of Kenyans.
Currently, there is no sector specific regulation around the licensing of digital lenders. However, there
have been recent efforts by parliament to empower the CBK to regulate the digital lending sector through
the proposed Central Bank of Kenya (Amendment) Bill, 2020.
4.2 Best practice principles for effective and efficient regulation
According to the International Telecommunications Union4, the formulation of regulatory policy on

digital lending ought to consider the impact of regulation on market conduct and systemic risk. This is
further elaborated in the table below.
Broader categorization Regulatory issue Brief description of regulatory

approach
Market conduct Data privacy and • Data privacy
management • Data management
requirements
• Confidentiality
Product disclosure Transparency of fees, charges,

terms, etc.
Customer redress • Redress procedure

• Internet/telephone complaint
center
Consumer over- Lending amount limits

indebtedness
Rates and pricing • Rate caps
• Length of loan terms
• Competitive pricing
Systemic risk Licensing and reporting • License requirements

requirements • Business continuity plan
• Reporting requirement
Lending prohibition Prohibits lending from certain types

of institutions
Regulatory sandboxes Allow organizations to experiment

with new financial technology models
4 ITU (2016). The Digital financial services ecosystem. Technical Report.

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with minimum supervision within
defined time and space limits
Capital requirements • Equity in relation to debt

• Ratio of capital to risk
weighted assets
Governance requirements • Managing financial risk

• Managing maturities of loans
and investments
• Organizational governance
standards
The OECD also sets out 8 principles of a good regulation5. A good regulation must:
i. Serve clearly identified policy goals, and be effective in achieving those goals
ii. Have a sound legal and empirical basis
iii. Produce benefits that justify costs, considering the distribution of effects across society and
taking economic, environmental and social effects into account
iv. Minimise costs and market distortions
v. Promote innovation through market incentives and goal-based approaches
vi. Be clear, simple and practical for users
vii. Be consistent with other regulations and policies
viii. Be compatible as far as possible with competition, trade and investment-facilitating principles
at domestic and international levels
We refer to these best practice principles in our analysis of the Kenyan digital lending regulation below
in this report.
4.3 The gaps in Kenya’s digital lending regulation
Although the digital lending industry in Kenya has greatly contributed towards financial inclusion, criticism has
been levelled against the industry for not putting in place strong consumer protection safeguards.
Consumer protection aims at improving the economic as well as the social welfare of consumers of a product
or service.6 Article 46 of the Constitution of Kenya, 2010 enshrines consumers rights as being important and
worthy of protection. The Consumer Protection Act, No. 46 of 2012 provides for a number of consumer rights
including the right to full precontractual information for the consumer to make an informed choice, the right to
complain with regard to quality, delays in provision of rectification, quantity and price of such goods or services
as are offered and the right to a reasonable notification of termination of service.
The Consumer Protection Act also prohibits unfair practices and it allows the consumer to cancel an agreement
in the event of an unfair practice7 and applies a wide interpretation of unfair practices, including:
a. making false, misleading or deceptive representations;
5 OECD Guiding Principles for Regulatory Quality and Performance (2005)

6
Section 3(4), Consumer protection Act No 46 of 2012.
7
Section 16 of the Consumer Protection Act, No. 46 of 2012
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b. making an unconscionable representation8 and this will be determined based on whether the
person making the representations knows:
i. that the consumer is not reasonable able to protect their interest due to disability,
ignorance, illiteracy or inability to understand language;
ii. the price grossly exceeds the prices at which similar services are readily available to like
consumers;
iii. that there is not reasonable probability of payment of the obligation in full by the
consumer; and
iv. that the terms of the consumer transaction are so adverse to the consumer as to be
inequitable.
Additional protection is afforded to consumers under Part VI of the Competition Act, 2010 which sets
out aspects of consumer welfare that ought to be upheld such as the prevention of false or misleading
representation as to the standard, quality, value or price of services offered 9 as well as the prevention
of unconscionable conduct.
A person who contravenes these principles of consumer welfare commits an offence and shall be liable
on conviction to imprisonment for a term not exceeding 5 years or to a fine not exceeding KES
10,000,000 (approximately USD 100,000) or both.10
The consumer protection requirements set out in the Consumer Protection Act and the Competition Act
do not comprehensively address the consumer protection risks inherent in consumer lending (including
digital lending) as these requirements are designed to apply generally to a broad range of goods and
services. For regulated institutions licensed under the Banking Act, the Central Bank of Kenya has
published detailed consumer protection guidelines under its prudential guidelines regime (CBK/PG/22).
These do not extend to unregulated digital lenders.
8 Section 13 (1) of the Consumer Protection Act, 2012

9
Section 55 of the Competition Act, 2010
10
Section 70 of the Competition Act, 2010
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5 Comparative Study
5.1 Justification for countries selected
We undertook a high-level review of the laws applicable to digital lending in several countries for
comparison and benchmarking purposes. The selected jurisdictions were:
• Australia, which has sophisticated legislation with regards to financial services and has a
regime specific to consumer credit;
• Egypt, which is one of the 3 largest economies in Africa and has an active digital lending industry;
• Uganda, which regulates digital lenders as microfinance providers;
• India, which has one of the largest digital lending markets in the word11;
• Mexico, which is an emerging market and has in the last 2 years adopted regulation specific to
crowdfunding and electronic payment funds;
• Nigeria, which is the largest African economy and is home to over 200 fintech standalone
companies, plus a number of fintech solutions offered by banks and mobile network operators
as part of their product portfolio12;
• Poland, which has a well-developed consumer credit regulatory model in Europe, and a
thriving fintech and digital lending industry;
• South Africa, whose digital lending platform market is estimated to realise a compounded
annual growth rate of 24.7% from 2019 to 202513;
• Spain, which is projected to have a total transaction value in the alternative lending industry of
USD 435.2 million in 202114;
• United Kingdom, which has a twin peak regulatory model of both prudential regulation as well
as conduct regulation; and
• Singapore, which has a strong financial system and its digital lending market is estimated to
achieve a compounded annual growth rate of 25.3% from 2019 to 202515.
11 A wider circle: Digital lending and the changing landscape of financial inclusion -
https://www.pwc.in/assets/pdfs/consulting/financial-services/fintech/publications/a-wider-circle-digital-lending-and-the-changing-
landscape-of-financial-inclusion.pdf
12 https://www.mckinsey.com/featured-insights/middle-east-and-africa/harnessing-nigerias-fintech-potential#
13
https://www.kbvresearch.com/south-africa-digital-lending-platform-market/
14
https://www.statista.com/outlook/399/153/alternative-lending/spain
15
https://www.kbvresearch.com/singapore-digital-lending-platform-market/
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5.2 AUSTRALIA
5.2.1 INTRODUCTORY
5.2.1.1 Scope of regulation
Australia adopts both a licensing and a conduct regulation approach for consumer credit providers,
regulated under the National Consumer Credit Protection Act 2009 (NCCPA). Conduct regulation is
primarily set out in the National Credit Code (NCC), which provides a consumer protection framework for
consumer credit products16.
5.2.1.2 Regulator
The Australian Securities and Investments Commission (ASIC) regulates the operations of consumer
credit providers.
5.2.1.3 Licensing
A lender is required to acquire an Australian Credit License (ACL) from ASIC to provide consumer loans17.
5.2.2 CORPORATE STRUCTURE REGULATION
5.2.2.1 Legal form of the credit provider
The NCCPA contemplates that applicants for an ACL may be natural persons, bodies corporate or
partnerships.18
5.2.2.2 Minimum capital requirements
There are no specific capital requirements applicable to the lender.
5.2.2.3 Local shareholding requirements
There are no specific requirements on local shareholding as there is no limitation on the form of the
business vehicle.
5.2.2.4 Board composition
There are no specific requirements on board composition as there are a range of legal forms that the
company may take.
Where the lender is a body corporate, a partnership or a trust, however, the directors, secretaries, senior
management, partners or trustees, as the case may be, must be fit and proper to engage in credit activities.
5.2.2.5 Allowed financing models
Digital lenders are prohibited from receiving deposits from the public but there are no restrictions on
specific financing models.19
16 It
must be noted, however, that the NCC is not applicable to low cost, short term credit, i.e. loans of less than 62 days, the fees
and charges of which do not exceed 5% of the loan amount and interest rate does not exceed 24% per annum (Clause 6(1) National
Credit Code)
17 Section 29(1) National Consumer Credit Protection Act 2009
18
Section 37(2) National Consumer Credit Protection Act 2009
19
Credit providers are not Authorised Deposit-taking Institutions as defined in s. 5(1) of the Banking Act 1959
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5.2.3 PRICING REGULATION
5.2.3.1 Interest rate control
The NCCPA places a restriction on fees and charges on small amount loans20 (classified as loans of AUD
2,000 (approx. USD 1525 or KES 170,000)21 or less that are to be repaid between 16 days and 1 year),
particulars of which are to be specified in regulations. Under the current regulations, these are limited to:
o An establishment fee (one-off) capped at 20% of the loan amount.
o A monthly account keeping fee capped at 4% of the loan amount
o A government fees
o Default fees (subject to 5.2.3.3 below)
o Enforcement expenses
For loans of between AUD 2,001(approx. USD 1,526) and AUD 5,000 (approx. USD 3,814), the charges
are limited to:
o A one-off establishment fee capped at AUD 400 (approx. USD 305); and/or
o A maximum annual interest rate of 48% of the loan amount, including all fees and charges.
It is an offence for a lender which grants loans above AUD 2,001 to enter into a credit contract if the total
amount of interest and charges per annum exceeds 48% of the loan amount. This restriction is not
applicable to small amount loans mentioned above.22
For loans above AUD 5,000 (approx. USD 3,814) maximum cost of credit capped at 48%.
5.2.3.2 Control over ancillary fees
See 5.2.3.1 above.
5.2.3.3 In duplum rule applicability

The NCCPA prohibits lenders from collecting more than twice the adjusted credit amount where small
amount credit contracts are involved23. Small amount credit contracts are those that are for an amount of
up to AUD 2000 (approximately USD 1,540) and for a time period of more than 15 days but less than 1
year.
This restriction does not apply to enforcement expenses.
5.2.4 DEBT COLLECTION REGULATION
Australian law requires that debtors be treated with fairness, respect and courtesy. Debt collectors are
prohibited from pursuing a person for a debt unless they have reasonable grounds for believing the
person is liable for the debt.
Debt collectors are specifically prohibited from:
o using physical force or coercion (forcing or compelling the debtor or a third party, such as a family
member, to do something)
o harassing debtors to an unreasonable extent
20 Section 31A National Consumer Credit Protection Act 2009

21
Exchange rate as at the date of writing: 1 AUD = 0.76 USD = 84.11 KES
22
Section 32A National Consumer Credit Protection Act 2009
23
Section 39B National Consumer Credit Protection Act 2009
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o misleading or deceiving the debtor (or attempting to) regardless of intention
o taking unfair advantage of any vulnerability, disability or other similar circumstances affecting the
debtor
The Australian Competition & Consumer Commission (“ACCC”) guidelines on debt collection further limit
the hours and frequency of contact with debtors (and third parties such as guarantors) to times that are
considered reasonable. These are generally between the hours of 9am and 9pm, except for telephone
contact on weekdays, which are 7.30 am and 9pm, and workplace contact, which is limited to the debtor’s
working hours, if known, or otherwise 9 am to 5pm on weekdays. Contact during public holidays is not
recommended.
It is recommended that third parties be contacted no more than once every six months, except when
permission has been granted by the third party. A third party is considered to be any person other than
the debtor that would be linked to the debtor (but does not include the debtor’s legal representative,
trustee or other authorised representative).
5.2.5 CREDIT INFORMATION REPORTS/ACCESS
5.2.5.1 Designation of digital lenders as third-party credit information providers

Credit providers are entitled to provide credit information to Credit Reference Bureaus (CRBs) under the
Privacy Act 1988, the Privacy Regulation 2013 and the Privacy (Credit Reporting) Code 2014 provided that the
individual to whom the information relates has been informed of the CRBs with which the lender deals.
5.2.5.2 Limitations on the ability of third-party credit information providers to list customers
All credit providers are equally eligible to provide credit information to CRBs.
5.2.6 MARKETING GUIDELINES
5.2.6.1 Mandatory Notices
Part 10 of the National Credit Code addresses advertising and related conduct. Under the Code, it is not
mandatory for an advertisement to contain an annual percentage rate. If it does, however, it must state
that fees and charges are payable; or state the amount of the fees and charges payable. It is an offence
for a person to disclose an interest rate in an advertisement that states or implies that credit is available
unless the interest rate is expressed as a nominal percentage per annum or is a comparison rate
calculated by the formula prescribed in Regulation 71(3) of the National Consumer Credit Regulations
2010 and accompanied by the warning below:
‘WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms
will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings
such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.’
5.2.7 CONSUMER PROTECTION REGULATIONS
5.2.7.1 Right to cancel loans
The debtor (or guarantor) is entitled to pay out the outstanding loan at any time. The lender is, however,
allowed to charge early termination charges provided for in the contract, in addition to the interest charges
and other fees payable until the date of termination.
5.2.7.2 Right to receive clear and complete information from lenders
The lenders are obliged under the NCCPA to disclose a variety of information to borrowers and the public
as a whole (as potential customers). This includes the annualized interest rates and changes in the
interest rates and ancillary charges.
5.2.7.3 Consumer complaints process
Where a consumer has issues with the financial service, the consumer may contact the Australian
Financial Complaints Authority (AFCA), an independent dispute resolution body set up for the resolution
of complaints against financial firms.
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5.2.8 DISPUTE RESOLUTION PROCESS
AFCA provides a dispute resolution mechanism. A decision by AFCA, however, is not binding on the
parties and the complaint may be taken to a court of law if either party is unhappy with the outcome of the
dispute resolution.
5.2.9 DATA PROTECTION AND CYBERSECURITY

5.2.9.1 Data protection and privacy
All credit providers must comply with the Privacy Act 1988, which protects personal information. Part III of
the Act specifically pertains to the regulation of consumer credit providers and the Privacy Regulation
2013 and the Privacy (Credit Reporting) Code 2014 set out a more comprehensive framework for the
regulation of credit providers.
5.2.9.2 Cybersecurity measures and protection of systems from cybercrime (possible designation of the
systems as protected systems)
The Criminal Code (as amended by the Australian Cybercrime Act 2001) prohibits unauthorized access,
modification or impairment of data held in a computer with an intent to commit a serious offence. Where
the unauthorized access is caused by means of a telecommunications device, the liability is absolute. A
person may still be found guilty of an offence even if commission of the serious offence is impossible.
While there is no special designation of financial systems as protected systems, the overly punitive nature
of the legislation affords digital service providers relative security.
5.2.10 FINANCIAL CRIME

5.2.10.1 Anti-money laundering regulation
ACL license holders are classified as reporting entities under the Anti-money Laundering and Counter-
Terrorism Financing Act, 2006 (AMLCTFA) and must therefore report suspicious matters and credit
transactions above a certain threshold to the Australian Transaction Reports and Analysis Centre
(AUSTRAC).
15
5.3 EGYPT
5.3.1 INTRODUCTORY
Mobile lending in Egypt is regulated under the Consumer Finance Law (18/2020) (the “Consumer
Finance Law”) which defines ’consumer finance’ to be as any activity aiming to provide funds for the
purchase of consumer and durable goods and services, once practiced as a regular activity.
Under the Consumer Finance Law, digital lenders fit into the description of Consumer Finance Companies,
which are companies licensed to offer consumer finance, which includes the provision of consumer credit.
5.3.1.2 Regulator
The Consumer Finance Law regulates credit services provided by non-bank financiers, bringing them
under the supervision of the Financial Regulatory Authority ("FRA”).
5.3.1.3 Licensing
Under decree no. 56 of 2020, issued by the FRA, entities undertaking Consumer Finance activities are
required to be licensed.
5.3.2.1 Legal form
Consumer financing companies must take the form of a joint-stock company.
A consumer financing company must have an issued and paid up capital of at least EGP 10 million (approx.
USD 640,000). At least 50% of the capital must be held by a juristic person.
At least 25% of the company’s share capital must be owned by a financial institution duly established and
carrying out financial activities under the supervision of a supervisory authority in its country of origin.
The board of directors must consist of a minimum 7 members. The board of directors must also meet the
“fit and proper” requirements set out by the FRA.

There are no limits on the allowed financing models for digital lenders.
There is no maximum interest rate.
We are not aware of any cap on the transaction fees and ancillary charges. The charges and transaction
fees, however, must be disclosed to the borrower in a clear and conspicuous manner prior to entering into
the lending agreement.
The Consumer Finance Law contemplates a standard contract form, to be issued by the FRA, which
includes details such as the amount of financing extended, the duration of the repayment term, the
interest rate, the borrower’s authorisation to disclose information to the FRA and credit rating agencies,
the borrower’s right to prepay, and other related conditions.
16
The in duplum rule is not applied in Egypt.
There are no restrictions on debt collection expenses. However, these must be carried out in a manner
that is in line with the principles of consumer protection provided by the FRA.
5.3.5.1 Right of digital lenders to provide credit information to credit information providers
The Consumer Finance Law contemplates the provision of information to credit bureaus by Consumer
Finance Companies and the consent of a borrower is one of the standard terms considered. As such,
digital lenders do not appear to be restricted from providing credit information.
5.3.5.2 Limitations on the ability to receive credit information
Egypt’s credit bureau (I-score) provides credit information to its members. While most of the members are
currently banks and Microfinance Institutions (MFIs), there is no restriction on membership by non-
banking entities.
We did not identify any marketing restrictions under Egyptian law.
Lenders are obliged to accept their clients’ requests for early repayment. The lender is entitled to deduct
the cost of the financing for the month in which the payment is made and it may add an accelerated
payment commission of no more than 5% of the remaining amount due.
5.3.7.2 Consumer complaint process
The lender is obliged to create a record of registering customers’ complaints submitted to it that includes
the following:
i. Date of submission of the complaint, its registration number and the name of the
person submitting it;
ii. A brief statement on the subject of the complaint;
iii. A statement of the documents attached to the complaint or which are submitted in
support of it;
iv. Summary of the opinion concluded by the examination of the complaint; and
v. The date the customer was informed of the response and how.
The lender must examine each complaint and make a decision within a week of the date of the
submission of the complaint, providing justifications in case the consumer’s complaint is disregarded. In
all cases, the consumer must be notified of the decision reached.
We were not able to assess whether there is a dispute resolution process set out in the Consumer
Finance Law or the attendant regulations as we were not able to locate an English translated version of
the legislation in this area.

Data Protection in Egypt is governed under the Personal Data Protection Law (No 151 of 2020) (the
“PDA”). Persons are prohibited from collecting personal data without the prior consent of the subject or a
specific, legitimate and public purpose.
17
Egypt’s primary law on cybersecurity is the Anti-Cyber and Information Technology Crimes Law (No. 175
of 2018). This law requires telecommunications companies to retain and store users’ data for 180 days in
order to assist the authorities in identifying users, metadata, and computer IP addresses24. Additionally,
the investigative authorities have the power to block any website whenever they deem that the website’s
content promotes extremist ideas that violate national security or damages the Egyptian economy25. As
the power of censorship that the authorities may exercise over a website or digital platform is linked to
public interest, it would only be of concern to digital lenders if their operations were deemed to ‘promote
extremist ideas that violate national security or damages the Egyptian economy’.

In 2002, Egypt enacted the Anti-Money Laundering Law (no. 80 of 2002) which established the Money
Laundering Combating Unit which is responsible for reviewing suspicious transaction reports from
financial institutions or other organizations. Deposit taking micro-finance institutions and banks are
required to observe the anti-money laundering requirements that include maintaining KYC documentation
as well as retaining documents for the prescribed period.
24 Article 2, Anti-Cyber and Information Technology Crimes law

25
Article 4, Anti-Cyber and Information Technology Crimes law
18
5.4 UGANDA
5.4.1 INTRODUCTORY
Digital lending in Uganda is offered under the microfinance model.
Mobile lending in Uganda is regulated under the Tier 4 Microfinance Institutions and Money Lenders Act,
2016 (the “Act”) and the Tier 4 Microfinance Institutions and Money Lenders (Money Lenders)
Regulations, 2018 (the “Regulations”). The Act was enacted to regulate entities that fall outside the
scope of the prudential regulation of the Bank of Uganda (“BoU”).
5.4.1.2 Regulator
The Act establishes the Uganda Microfinance Regulatory Authority (“UMRA”), which is responsible for the
administration of the Act, including the licensing, supervision and regulation of money lenders and Tier-4
Microfinance Institutions.
5.4.1.3 Licensing
The Act does not apply to microfinance business that is conducted by institutions that are regulated by
the BoU. The definition of a ‘money-lender’ specifically excludes any company carrying out the business
of banking or insurance. Money lenders may not operate without being licensed by UMRA.
The money lending license is valid for a maximum period of 1 year, expiring on the 31st of December
every year.
Money lending institutions must be registered as limited liability companies.
UMRA is tasked with setting the minimum capital requirements for money lenders and Tier-4 Microfinance
Institutions. The minimum capital requirements are yet to be determined by UMRA.
There are no local shareholding requirements under the Act or the Regulations.

There are no limits on the composition of the Board of Directors of a money lender.

There are no limits on the allowed financing models for money lenders.
The Act empowers the Minister26, in consultation with UMRA, to prescribe a maximum interest rate
chargeable by a money lender. The lender is allowed a period of three months after the issue of the
notice to comply with the maximum interest rate prescribed. There are currently no interest rate caps and
the interest rates are mostly determined by market forces.
The Act also prohibits the charging of compound interest on the amounts lent. The money lender is
entitled to charge simple interest on the amounts from the date of the default to the date of full payment.
26 The Minister of Finance, Planning and Economic Development

19
There is no cap on the transaction fees and ancillary charges in a money lending contract. The charges
and transaction fees must be disclosed to the borrower in a clear and conspicuous manner prior to
entering into the money lending agreement.

The in duplum rule is not applied in Uganda.

There are no specific debt collection regulations under the money lending laws of Uganda.
The Financial Institutions (Credit Reference Bureaus) Regulations, 2005 (the “CRB Regulations”)
provides that a credit reference bureau shall only provide credit information to financial institutions
regulated under the Financial Institutions Act and deposit taking micro-finance institutions. However, the
CRBs may also provide such information to users other than Financial Institutions and deposit taking
microfinance institutions provided written authorization is given by the holder of the information to the
user. This means that digital lenders and other moneylenders can access CRB information provided that
they have obtained the relevant authorizations.
In addition to Banks and deposit taking micro-finance institutions, CRBs may seek information from
publicly available sources. There is no specific provision allowing moneylenders to provide information to
credit reference bureaus.
5.4.6.1 Time restrictions
We did not identify any marketing restrictions under Ugandan law.

The Act provides that the right to early repayment must be contained in the lending contract.

There is no provision in the Act on the complaints process.
There is no dispute resolution process set out in the Act or the Regulations.

Data Protection in Uganda is governed by the Data Protection and Privacy Act, 2019. Persons are prohibited
from collecting personal data without the prior consent of the subject or a legitimate interest including
authorisation by law or compliance with a legal obligation to which the data controller is subject27.
27 Section 7 Data Protection and Privacy Act, 2019.

20
Uganda has three primary cybersecurity laws:
o the National Information Technology Authority Act, 2009 (“NITAA”);
o the Computer Misuse Act, 2011 (“CMA-U”); and
o the Regulation of Interception of Communications Act, 2010 (“RICA”).
NITAA establishes the National Information Technology Authority (“NITA-U”) which has a broad mandate
to co-ordinate, supervise and monitor the utilization of information technology in the public and private
sectors.
The CMA-U designates a computer as a protected computer if the person knows, or ought to have
reasonably known that the computer is used for a number of uses including the provision of services
directly related to communications infrastructure, banking and financial services, public utilities or public
key infrastructure. Unauthorised access of protected computers carries an elevated penalty on conviction
– imprisonment for life. This affords digital lenders an increased sense of protection from cyber attackers
as part of the general category of financial services.
The Electronic Transactions Act, 2011 (“ ETA-U”) and the Electronic Signatures Act, 2011 (“ESA-U”)
complete the complement of cybersecurity laws, giving legal effect to electronic contracts and legitimizing
electronic signatures. This allows for the recognition of digital lending contracts, concluded on digital
platforms, as legitimate written contracts.

Uganda has an Anti-Money Laundering Act, 2013 (“AMLA”), which is applicable to persons who conduct
the business of lending including consumer credit, mortgage credit and finance of commercial
transactions. As such, AMLA is applicable to digital lending entities.
21
5.5 INDIA
5.5.1 INTRODUCTORY
India has adopted a licensing approach for Non-Banking Financial Companies (“NBFCs”). All Digital
Lenders in India are required to obtain an NBFC license. No company offering non-banking financial
services is permitted to operate without registration with the Reserve Bank 28.
5.5.1.2 Regulator
The Reserve Bank of India (“RBI”).
5.5.1.3 Licensing
The digital lending business carried out by NBFCs can be undertaken once RBI issues a Certificate of
Registration permitting the NBFC to carry out consumer lending business. 29
NBFCs take the form of a private limited company or a public limited company.
NBFCs are required to have a minimum paid up share capital of INR 20.000.000 (around USD 274.000)
There are no special local shareholding requirements. However, a private limited company must have a
minimum two shareholders. While the public company must have a minimum of seven members.
Private limited companies are required to have a minimum of 2 directors with at least 50% of the directors
having a relevant finance background.
While India’s laws generally provide for both deposit taking NBFCs (NBFCs-D) and non-deposit taking
NBFCs (NBFCs-ND), the RBI has discouraged the formation of new NBFCs-D by simply denying them
licenses.
As such, while there are no specific financing models, deposit taking is not an option available to
newly formed NBFCs.
The RBI has not prescribed any ceiling on interest rates that can be charged by an NBFC. All NBFCs
have to adopt an interest rate model approved by their respective board of directors. However, in
practice, NBFCs charge interest based on the creditworthiness of the customers to whom the loan
product has been disbursed.

There are no prescribed norms for pricing of loans by an NBFC. These are typically market driven.
28 Section 45LA Reserve Bank of India Act

29
Regulation 6 of the Non -Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017
22
The in duplum rule is not applicable in India.
The lenders are automatically members of all Credit Information Companies (“CICs”) and may receive the
credit information reports and they can submit data (including historical data) to the CICs as well.
However, NBFCs must obtain prior and explicit consent of the consumer to access the credit information.
See 5.5.4.1 above.

Yes, however this is on a contractual basis.
Non-banking financial companies are required to have in place customer complaint policies. Complaints
shall be handled or disposed of by the company within such time and in such manner as provided for in
the board approved policy. If the complaint is not resolved within a month, the customer may appeal to
the customer education and protection department of the RBI.30
5.5.6.1 Mandatory notices

There are no mandatory marketing notices required under Indian law.
A lender shall put in place a Board approved policy to address participant complaints. These shall be
dealt with as stated in the policy. If the complaints/disputes are not settled within a month, the participant
may appeal to the Customer Education and Protection Department of the RBI.

Although there is no data protection law in place, there is a Data Protection Bill which is intended to
protect personal data of individuals, including borrowers.
5.5.8.2 Cybersecurity measures and protection
In recognition of the data-heavy nature of the non-bank financial service sector, lenders are expected to
conform to Master Direction DNBS.PPD. No. 04/66.15.001/2016-17 on the Information Technology
Framework for the NBFC sector. The Direction requires lenders to put in place a Board approved cyber
security policy setting out an appropriate approach to combat cyber threats, given the level of complexity
of the business and acceptable levels of risk. The Direction requires that NBFCs that are already using or
intend to use mobile financial services should develop a mechanism for safeguarding information used by
mobile applications to provide services to customers, and must, at a minimum provide for end-to-end
encryption.
30 Regulation 13 of the Non -Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017
23
5.6 MEXICO
5.6.1 INTRODUCTORY
Digital lending conducted by non-deposit taking lenders in Mexico is largely unregulated. Mexico has
enacted the Financial Technology Institutions Law (the “Fintech Law”) to regulate financial technology
institutions which defines a very specific set of financial institutions that are considered ‘Fintech
Institutions’. These are: Crowdfunding institutions and electronic payment institutions.
As a result of this, most consumer credit lending institutions are more commonly organized as multipurpose
financial entities referred to as sociedades financiera de objeto multiple (SOFOM). These may be regulated or
unregulated. The unregulated multipurpose financial entities are not regulated under the Fintech Law.
5.6.1.2 Regulator
Fintech Institutions are regulated by Mexico’s National Banking and Securities Commission - Comisión
Nacional Bancaria y de Valores (CNBV)31. However, as non-bank lending financial institutions are not
classified as Fintech Institutions, the CNBV does not regulate non-bank digital lenders. However, they fall
under the supervision of the National Commission for the Protection and Défense of the Users of
Financial Services (CONDUSEF) and the Bank of Mexico.
5.6.1.3 Licensing required for different models of digital lending
While unregulated SOFOMs do not require any specific licensing, institutions operating innovative
models32, as defined in Circular 5/2019 issued by the Bank of Mexico, must submit an application for
authorization to the Authorizations and Consultations Management department of the Bank of Mexico.
An unregulated SOFOM (a limited liability company) is the legal form adopted by non-bank digital lenders.
The unregulated SOFOMs ought to include the expression ENR to their names to indicate their
unregulated status.
Additionally, the constitutive documents of the company i.e. the bylaws of the company ought to:
o include the address of its central administration, which must be within Mexico;
o expressly state that any modifications to the bylaws must have prior approval of the Bank of
Mexico; and
o where appropriate, state the objects of the company to be the provision of routing, clearing and
settlement, or any combination of such services.
There are no minimum capital requirements for unregulated SOFOMs.
There are no local shareholding requirements for unregulated SOFOMs. However, they must be
incorporated in Mexico.
31 The collection of deposits is only allowed for banking and credit institutions licensed under the Credit Institutions Law.
32 The Fintech Law establishes the possibility of operating on a temporary basis under an innovative model, namely institutions that
provide financial services through technological tools with different characteristics to the ones available in the market. A temporary
authorization will be granted to this type of fintech institution, in compliance with the Fintech Law.
24
There are no specific requirements on the board composition under Circular 5/2019 issued by the Bank of
Mexico. It is important to note that the applicant for authorization must list all the people who hold (or are
proposed to hold) managerial positions in the applicant company. Information shall also be provided on
people who directly or indirectly hold at least 10% of the capital of the applicant company.
There are no specific financing models proposed. However, the applicant must provide a study showing
the financial viability of its business model and proposed operations.
The Bank of Mexico is empowered to set limits on interest rates on interest rates and commissions
chargeable by institutions granting loans or credit.

The Bank of Mexico is also empowered to control the commissions, collection fees and other fees
applied by financial entities in contracts with their customers33. However, we are not aware of any
specific pricing restrictions in relation to fees and interest.
Under Circulars 22/2010 and 36/2010, however, some general principles are applicable with respect to
chargeable fees such as:
o Institutions may not charge more than one fee per event;
o No fees are applicable for the cancellation of financial services;
o Fees must be properly registered and published; and
o Fees may not be altered without notification.

We are not aware of the in duplum rule’s applicability to digital lending transactions in Mexico.

There is no specific restriction on debt collection expenses, but the Bank of Mexico is empowered to set a limit
on debt collection expenses under the Law on Transparency and Organisation of Financial Services34.
The use of threats and intimidation on debtors and related third parties is prohibited. Collection agencies
that breach these rules are sanctioned and blacklisted. This promotes consumer protection as consumers
of credit are have a channel to report such nefarious agencies.
A financial entity is allowed access to credit reference information only if they have a permissible purpose,
which includes information sought within the context of application for credit by a borrower and the
reviewing of existing credit facilities.
The Credit Reference Bureau guidelines do not restrict digital lenders from providing information to
the credit reference bureaus.
33 Article 4 Law on Transparency and Organisation of Financial Services

34
Article 4 Law on Transparency and Organisation of Financial Services
25
There are no specific time restrictions on advertisement of money lending services. This applies to both
lending by deposit taking institutions as well as non-deposit taking institutions.
5.6.6.2 Standard terms in advertisements

Advertisements relating to consumer lending products are required to have warning information indicating:
o variable interest rates, where relevant;
o commission applicable to the user and applicable assumptions such as the fact that breaching
payment obligations can generate additional commissions and arrears;
o the fact that exceeding one’s capacity to pay shall affect one’s credit history;
o the fact that guarantors will be responsible for the payment of the whole amount if it falls due; and
o the fact that loans provided in foreign currency or investment units will vary according to the
exchange rate or the index of reference for the investment units.
The CONDUSEF is empowered to determine clauses that are considered to be prejudicial to the
consumers of credit in standard contracts. Examples of such clauses that are banned include:
o clauses terminating the contract if a borrower defaults in an unrelated obligation;
o clauses allowing the lender to terminate the contract without prior notification;
o clauses that unreasonably restrict the consumer’s rights;
o clauses that impose a penalty for early repayment; and
o clauses that allow for unilateral modification of the contract unless the modification is in the
borrower’s favour.
Customers have a right to receive fully accurate pre-contractual information from the digital lenders. Loan
agreements executed through a standard-form contract are required to have a cover letter that shows the
total annual cost of the credit. This should include all costs, expenses and applicable fees.
5.6.7.3 Right to be charged only for products they’re subscribed to
Customers have the right to only be charged for products they have subscribed to as is explained in the
cover letter that accompanies the standard form contracts.
5.6.7.4 Right to be made aware of the products they’re subscribed to
Customers have the right to be made aware of the products they have subscribed to as is explained
in the cover letter that accompanies the standard form contracts.
Parties aggrieved by financial service institutions shall lodge their complaints either with the financial
institution’s internal consumer complaints unit or with CONDUSEF. CONDUSEF may, on its own motion,
reject any complaints that are deemed inadmissible.
26
Claims must be filed within 2 years of the date of the event giving rise to the complaint. Failure to do so
would result in the claim being inadmissible.
The filing of a claim with CONDUSEF places a moratorium on any legal action on the subject matter until
the proceedings at CONDUSEF are concluded.

Mexico has in place the Law on the Protection of Personal Data held by Private Parties (the Data
Protection Law).
Cybersecurity is generally provided for in the Data Protection law. Private entities are required to have
adequate physical and organizational measures to prevent breaches of personal data.

CONDUSEF has supervisory powers over the unregulated multipurpose financial entities with regard to
transparency and anti-money laundering regulation. It applies the CNBV’s know-your-customer policies
and supervises the financial transparency measures taken by the institutions it regulates.
Unregulated SOFOMs must comply with article 115 of the Credit Institutions Law in relation to article 87D
of the General Law of Credit Auxiliary Organizations and Activities which sets out mandatory measures
that must be complied with in anti-money laundering such as the maintenance of records and
documentation relating to their operations for the last 10 years.
27
5.7 NIGERIA
5.7.1 INTRODUCTORY
Finance Companies are non-deposit taking companies. “Finance Company Business” is defined as the
business of providing financial services to individual consumers and to industrial, commercial, or
agricultural enterprises. Some of these financial services include the provision of consumer and business
loans to individuals and the Micro, Small and Medium Enterprises (MSMEs). They are regulated by the
Central Bank of Nigeria (CBN).
Finance Companies are regulated under the provisions of the Guidelines for Finance Companies in
Nigeria, issued by the CBN. Additionally, the market is regulated by the Banks and Other Financial
Institutions Act (“BOFIA”).
5.7.1.2 Regulator
The CBN is the main regulator of finance companies that carry out digital lending activities.
5.7.1.3 Licensing
A Finance Company license is issued by the CBN.
A Finance Company is required to be incorporated as a company with only one object, which shall be
engaging in the business of a Finance Company. Any other business activity is prohibited.

Finance Companies have a minimum capital requirement of 100 million Naira (around USD 262,000).
There are no local shareholding requirements for any of the licenses discussed above. The shareholders
of the company will, however, need to be approved by the CBN prior to the issuing of an FC license.

Finance companies are held to a similar standard of corporate governance as commercial banks. The Board
must have a minimum of 5 and a maximum of 9 directors with more than 50% of the directors being non-
executive directors. A minimum of 1 and a maximum of 2 directors must be independent directors. CEOs and
directors may serve for a maximum of 2 terms of 5 years each. Independent directors may serve for a
maximum of 2 terms of 4 years each. The CBN must approve the appointment of any new directors.
There are no specific requirements about the financing model. However, finance companies are
expressly prohibited from taking deposits.
There are no interest rate controls for Finance Companies in Nigeria.
The CBN, sets out a Guide to Charges by Banks and Other Financial Institutions (“Guide”). The rate
generally anchors the Monetary Policy Rate and reflects the risk-based pricing model.

The current CBN Guide sets out the following caps on lending fees for:
28
o Facility restructuring fees are capped at 0.5% of the outstanding amount.
o Management fees (covering processing and appraisal fees) are capped at 1% of the principal
amount granted (one-off)
o Renewal fees are capped at 0.5% (one-off)
o Default fees are capped at 1% flat on unpaid instalments per month in addition to charging
the current rate of interest on the outstanding debt.
o Commitment fee is capped to 1% of the undisbursed amount (one-off)
o Advisory fees are only applicable where there is a written advisory/consultancy

agreement between the lender and the borrower.
There is no indication of the in duplum rule’s applicability to digital loans. There is a cap on penalties that
can be charged on late repayment of loans by consumers. The cap is maximum flat fee of 1% per month
of the outstanding amount in addition to charging current rate of interest on outstanding debt.

There are, no specific prohibitions or limits on debt collection charges.
There are no specific debt collection regulations in Nigeria. The Consumer Protection Regulations 2019
(the “CPR”) provide that financial institutions shall adopt debt recovery processes that are courteous and
fair to consumers. The consumers must be proactively engaged and given early notice of outstanding
obligations prior to the commencement of debt collection efforts.

A lender may access the local credit bureaus, after obtaining consent from the affected borrower.
The lenders can submit the credit information to the Credit Reference Bureau which allows for access to
credit information and prevents over-indebtedness of customers as they cannot receive credit once they
are in default.
5.7.6.1 Mandatory Inclusions
The CPR require that the overall impression of advertisements shall not overly emphasize the benefits of
a product or service while de-emphasizing its associated risks. The advertisements must also disclose the
details of the cost of a product or service, including all the associated fees and charges.
An advertisement shall not mention the names of competitors or make comparisons in the advertisement.
Consumers of financial services in Nigeria are protected by the CPR.
Institutions are required to give a consumer a cooling-off period of 3 days after signing a credit contract
within which a consumer may cancel the contract without having to pay any penalty or charges. The
consumer, however, may choose to waive the option in writing35.
35 Regulation 4.3.6 Central Bank of Nigeria Consumer Protection Regulations 2019

29
Parties aggrieved by Finance Companies can lodge their complaints with the Consumer and Financial
Protection Department of the CBN for dispute resolution.
No specific dispute resolution process has been set out in statute for the resolution of disputes
pertaining to consumer lending.

The Nigeria Data Protection Regulation 2019 (“NDPR”) governs the protection of personal data. It
prohibits the processing of data without a lawful purpose. Some of the lawful bases for processing include
the consent of the data subject and compliance with a legal obligation such as compliance with anti-
money laundering legislation.
CBN has released draft Risk-Based Cybersecurity Framework which shall be the precursor to actual
regulations in the space. It is, however, notable that the draft framework only caters to Deposit Money
Banks (“DMBs”) and Payment Service Providers (“PSPs”). The CBN required all DMBs and PSPs to
comply with the requirements under the framework by 1 January 2019. It follows that there are no
prescribed cybersecurity standards for non-deposit taking finance companies.

All Finance Companies are required to comply with the Money Laundering (Prohibition) Act, 2011; the
Terrorism Prevention Act, 2011; the Central Bank of Nigeria (Anti-Money Laundering and Combating the
Financing of Terrorism in Banks and Other Financial Institutions in Nigeria) Regulations, 2013 and any
relevant circulars issued by the CBN on the subject.
Finance Companies are required to comply with the KYC requirements set out by the CBN under their
respective Guidelines. Finance companies are also expected to define their own KYC policies
incorporating elements of: Customer Acceptance Policy, Customer Identification Procedures and Risk
profiling and transaction monitoring data.
30
5.8 SOUTH AFRICA
5.8.1 INTRODUCTORY
Digital lending and similar forms of microlending are regulated by the National Credit Act Regulations (34
of 2005) (the “NCA”). The NCA applies where a credit provider enters into credit agreement with natural
persons, irrespective of the value of the loan.
5.8.1.2 Regulator
The National Credit Regulator (the “NCR”) regulates all credit service providers regulated under the NCA.
5.8.1.3 Licensing
The license required to operate a digital lending business is issued by the National Credit Regulator and
is a mandatory requirement prior to commencement of the business of digital lending.
The legal form can be a private or a public company or a sole proprietor.

There are no minimum capital requirements under the NCA.
There is no local shareholding requirement.
There are no formal requirements on the Board composition of a credit provider as the NCA allows a
number of different business vehicles to be used.

There is no regulation of the financing models allowed under the NCA.
There is a maximum interest rate that may be charged, which is dependent on the type of credit
agreement. The maximum prescribed initiation fee is R165 (USD 10.9) per credit agreement, plus 10% of
the amount in excess of R1 000 (USD 66.1), but with a maximum cap of R1 050 (USD 69,4). Additionally,
the initiation fee is not allowed to exceed 15% of the principal debt.
Also, a maximum interest rate of 5% per month on the first loan and 3% per month on subsequent loans
within a calendar year may be charged by the lender.
Additionally, a service fee, which may be payable monthly, annually, on a per transaction basis or on a
combination of periodic and transaction basis and must not exceed R60 (USD 3,9) per month36.
However, the interest rate in cases of default or overdue payments may not exceed the highest rate
applicable to any party of the principal debt37. As such, there is effectively no default interest rate.
36 Market research carried out by Digital Lenders Association of Kenya

37
Section 103(1) National Credit Act
31
The NCA prescribes an exhaustive list of fees, charges, interests that a credit provider may recover from
consumers. Credit providers may not claim any additional amounts above these indicated by the NCA.
The initiation fee and collection costs which accrue during the time that a customer is in default may not in
aggregate exceed the unpaid balance of the principal debt of the credit agreement at the time that the
defaults occurs38.
Under South African law, debt collection costs are defined to include the legal fees relating to any debt
collection action. In the 2019 case of University of Stellenbosch Law Clinic and others v National
Credit Regulator and others, the Court held that legal fees may only be claimed if agreed to by the
debtor and taxed in court.
Debt collection is regulated under the Debt Collectors Act 1998. A debt collector is prohibited from:
o using threats or force against a debtor or their

family; o intimidation of the debtor or their family;
o using fraudulent or misleading representations including:
• the simulation of legal procedures;
• the use of simulated official or legal documents;
• representation as a police officer, sheriff, officer of court or any similar person;
or
• the making of unjustified threats to enforce rights.
All credit providers are entitled to provide information to registered credit bureaus on payment of the
relevant filing fees39. The NCA obliges the credit bureau to accept such information.
There are no limitations with regards to third-party credit information providers listing consumers of
credit that have defaulted on their repayment obligations.
There are no time restrictions for advertisements under the NCA.
A consumer (or the guarantor) is entitled to settle the credit agreement at any time, with or without notice
to the credit provider. Consequently, the consumer is not be penalized for early payments under the credit
agreement.
The NCA establishes a National Consumer Tribunal (the “NCT”) which conducts hearings addressing
complaints lodged under the NCA.
38 Section 103(5) National Credit Act

39
Section 70 National Credit Act
32
The NCA provides for 2 dispute resolution options available to consumers:
o Alternative Dispute Resolution: Non-bank credit providers may refer their matters to either a
consumer court or an alternative dispute resolution agent for resolution by conciliation,
mediation or arbitration.
o Initiating a complaint to the NCR
Complaints to the NCR are made in a form prescribed by under the NCA.

The Processing of Personal Information Act (“POPIA”) restricts the processing of personal information
without justification. Processing that is necessary for the performance of a contract to which the data
subject is party, and processing to comply with a legal obligation on the controller are, however,
acceptable justifications40.
South Africa is yet to enact the Cybercrimes and Cybersecurity Bill. As it stands, there is no obligation on
financial service providers to provide evidence of cybercrimes on their systems. Clause 32 of the Bill,
however, imposes obligations on financial institutions and other persons in control of data, computer
programs and computer systems to provide assistance to investigating authorities on cybercrimes on their
systems.
It also proposes the establishment of a Cyber Response Committee (“CRC”) to oversee the
implementation of the country’s cyber initiatives.

South Africa’s anti-money laundering legislation is primarily made up of two Acts – the Financial
Intelligence Centre Act (“FICA”) and the Prevention of Organized Crime Act (“POCA”). However, credit
providers, registered in terms of the NCA, do not fall within the ambit of an accountable institution and
accordingly do not have to comply with the provisions of FICA 41.
The Financial Intelligence Centre Act, 2001 sets out the acceptable KYC measures and the Act was
amended in 2017 to cater specifically to digital KYC information.
40 Section 11(1) Processing of Personal Information Act

41
Schedule 1 to the Financial Intelligence Centre Act, 2001
33
5.9 POLAND
5.9.1 INTRODUCTORY
A lending company may start issuing loans after being registered in the Lending Institutions Registry
(Registry). The Registry is supervised by the Polish Financial Supervision Authority (Supervisor of all
Financial Institutions in the country). The Registry is available through the website of the Polish Financial
Supervision Authority. The Registry does not control the lending institutions.
5.9.1.2 Regulator
While the Registry maintains a list of lending institutions, it does not have any regulatory mandate. The
Polish Office of Competition and Consumer Protection, however, has the legal authority to supervise
lending companies from a consumer protection aspect e.g. to determine whether certain clauses in the
loan agreements are illegal.
5.9.1.3 Licensing
There are no licensing requirements for lending companies.
The lending activities may only be carried out by a limited liability company or joint stock company.
The minimum capital of a lending company is 200.000 PLN (approx. USD 54,000). The share capital may
be paid in form of cash contribution only. Funds spent to cover the capital ought not to include credit,
loan, issue of bonds or undocumented sources.
There are no local shareholding requirements.
There are no special requirements for the Board structure of a lender. Members of Management Board,
Supervisory Board, Audit Committee or proxies of a lending institution cannot be persons who have been
convicted for crimes relating to reliability of documents, property, business transactions, trading in cash
and securities or treasury crimes.

There are no specific regulations relating to the financing.
In Poland there are 2 types of caps:
a) Cap for fees and commissions which can be calculated next to the contractual interests. This cost
includes all commissions, fees, and Debt Collection charges. This maximum amount of non-
interest costs of a credit shall be calculated according to the following formula:
34
Where individual symbols mean:
MPKK - maximum amount of non-interest costs of a credit,
K – total credit amount,
n – repayment period in days,
R – number of days in a year.
Example:
→
Calculation of Maximum fees and commissions for a loan of USD100 for 30 days
USD 100 x 25% + (USD 100 x 30/365 x 30%) = 27.47
In this example of a loan of USD100 for 30 days the total fees/commissions that can
be charged to the customer equals to USD 27.47, so the customer will have to repay
USD 127.47 (USD 100 loan principal + 27.47 fees/commissions)
Additionally, all fees, commissions, debt collection costs of a loan cannot exceed the
loan amount (loan principal that was issued to the customer), hence such fees and
costs cannot be higher than 100% of the issued loan amount.
b) Contractual interest cap – the maximum amount of interest shall not exceed annually twice the
amount of statutory interest (maximum interest). For instance, currently the annual statutory
interest is 3,6% per annum. Thus, taking into account above, the maximum interest is 2x 3,6%=
7,2% per annum.

Please see 5.9.3.1.a) above.
5.9.3.3 In duplum rule applicability.

The in duplum rule does not apply in Poland. Penalty interest may exceed the principal amount of the loan.
However, the maximum amount of penalty interest on overdue loans cannot exceed twice the statutory penalty
interest rate of 5,6%. Thus, the maximum chargeable penalty interest is 11,2% per annum.
The costs of debt collection are included in the rate cap under 5.9.3.1Error! Reference source not
f ound. above applicable to ancillary charges. The cap on ancillary costs effectively applies to debt
collection.
Lending institutions are obliged to report data to credit bureaus and are also authorized to obtain reports
to assess credit risk. Reporting is regulated under a separate legislative instrument. Generally, reports
are sent twice a week by all authorized institutions to credit bureaus. Each authorized entity reports on
the same day.
There are no limitations on the ability of lenders to provide information to credit bureaus.
In advertisements of consumer loans that contain information on costs of consumer credit, a lender shall
provide a consumer with the following information in a clear, understandable and visible manner:
35
o credit interest rate with specification of fees included in the total credit
cost; o total credit amount; and
o annual percentage rate (APR).
If applicable, a lender or credit intermediary shall also provide a consumer with information on:
o tenor of the loan agreement;

o total amount to be repaid by a consumer and amounts of instalments;
o price of goods or service and amount of all prepayments in case of a credit agreement
including a possibility to postpone repayment.
The above information has to be presented in a disclaimer to the customer in a manner that is easily
noticeable by the customer. The special guidelines issued by the Office of Competition and Consumer
Protection describe the mode of the displaying the above information.
The Office of Competition and Consumer Protection has issued specific guidelines for the financial sector
(banks and non-banks) about consumer loan advertisements.
5.9.7 CONSUMER PROTECTION

As per the Credit Consumer Act, a consumer has the right to withdraw from a loan agreement within 14
days of entering into one and the right to early repayment of the loan.
The Financial Ombudsman may take legal action on behalf of customers of financial service providers in
cases concerning unfair market practices.
5.9.7.3 Restrictions on debt collection expenses
Debt collection costs are included in ancillary charges. The cap on ancillary costs effectively applies to
debt collection.
5.9.8.1 Setting up specialized forms of dispute resolution: Ombudsman, tribunal, online alternative
dispute resolution.
There is a Public Ombudsman specifically for customers of financial institutions (banks, non-banks,
insurance companies), traditional court proceedings and online -court as well.

5.9.9.1 Data protection regulation in your market: any particular standards for digital lenders?
Poland, being a member of the European Union is subject to the EU’s General Data Protection
Regulation (“GDPR”).
5.9.9.2 Cybersecurity regulatory requirements.
There is separate legal statute concerning cybersecurity. The statute is based on an EU directive.

5.9.10.1 Anti-money laundering regulation.
Lending institutions are subject to and qualify as “obliged institutions” under the Polish Anti-Money Laundering
Act42 . The regulator of the national system of counteracting money laundering and the financing of terrorism is
the General Inspector of Financial Information (the “GIFI”). Obliged institutions are required
42 Act of 1 March 2018 on Counteracting money Laundering and Terrorist Financing

36
to comply with client due diligence, reporting and account monitoring obligations under the anti-money
laundering regulations.
Lenders are required to notify the GIFI of transactions which exceed EUR 15,000 in value and are:
o cash payments or withdrawals (cash transactions);
o transfers of funds (including international transfer to a recipient, whose payment service provider
is an obliged institution), with the exclusion of certain exceptions specified in the Polish Anti-
Money Laundering Act;
o purchase or sale of foreign currency; or
o notarial acts specified in the anti-money laundering/counter-terrorism financing law.
Reporting is carried out on an ongoing basis, not later than within 7 days from the detection of an over-
threshold transaction.
37
5.10 SPAIN
5.10.1 INTRODUCTORY
The use of fintech in consumer lending is largely unregulated in Spain. The loans are governed by the
general commercial law.
5.10.1.2 Regulator
Lenders subject only to the general commercial law are not under any specific regulator but will be
under the supervision of the Spanish consumer protection regulation.
5.10.1.3 Licensing
There are no licensing requirements for digital lenders. The lender will only need to be registered within
the relevant Commercial Registry.

There is no required legal form for a non-bank lender.

There are no minimum capital requirements for the non-bank lenders.

Non-bank lenders do not have any specific shareholding requirements

There are no regulations on board composition for non-bank lenders.

There are no specific financing models.

There are no interest rate caps on non-bank lenders and interest rates are determined by market forces.

There are no caps on ancillary fees for non-bank lenders.

The in duplum rule is not applicable to non-bank lenders.

There are no debt collection regulations specific to digital lending.

The Risk Information Centre (CIR) receives information on virtually all loans, credits, bank endorsements
and other financial risks from financial entities.
38
There are no limitations on digital lenders’ ability to provide information to the CIR.

There is no specific regulation on the marketing of digital lending products.

A consumer is entitled to cancel a contract within 14 calendar days of entering into the contract without
penalty (unless the right is expressly waived). Cancelation does not exonerate customers from paying the
amounts that are due under the credit agreement. The consumer is still required to repay the entire
amount accrued until the date of cancellation.
The lender is required to inform the consumer of all the conditions of the contract in written form or
another medium accessible to the consumer. The lender is also required to provide certain information in
a clear and concise manner prior to the conclusion of the contract. This information is outlined in an
information form as described in the EU Directive concerning consumer credit.
The borrower and the lender may submit their conflicts to arbitration or to other systems of alternative
dispute resolution as shown on the list published by the European Union on alternative dispute resolution
systems. This list includes mediation, conciliation, ombudsmen, arbitration and complaints boards43.
Spain is subject to the EU’s General Data Protection Regulation (GDPR), which allows for processing of
personal data where it is necessary for compliance with a legal obligation to which the controller is subject.

Although unregulated digital lenders form most of the digital lending in Spain, there are Financial Credit
Establishments (FCEs) which are subject to Law 20/2010 on Prevention of Money Laundering and
Terrorism Financing and the EU’s Anti-money laundering directives.
43 https://ec.europa.eu/info/live-work-travel-eu/consumer-rights-and-complaints/resolve-your-consumer-complaint/alternative-
dispute-resolution-consumers_en
39
5.11 UNITED KINGDOM
5.11.1 INTRODUCTORY
In the UK, the offering of credit services over an electronic medium is considered a regulated activity and
is specially provided for under article 36H of the Financial Services and Markets Act (Regulated Activities)
Order 2001 (SI 2001/54444) (the “RAO”).
High Cost Short Term Credit (HCSTC) is regulated as a subset of consumer credit, with specific
limitations on the pricing of the credit. It is also a requirement that a consumer credit provider expressly
inform the Financial Conduct Authority (the “FCA”) if they intend to provide HCSTC.
Consumer credit in the UK is primarily regulated under the Financial Services and Markets Act 2000 (the
“FSMA”). The RAO defines the different activities that are deemed to be regulated activities and which fall
within the ambit of the Act. Operating an electronic system in relation to lending is considered a regulated
activity and as such is governed by the RAO and by extension, the FSMA.
There are also additional provisions that were retained from the Consumer Credit Act, 1974 (the “CCA”),
which was partly repealed, that apply to consumer credit.
5.11.1.2 Regulator
The UK has a “twin peaks” model of regulation for the financial services sector, where the prudential
regulation of financial service providers is carried out by one regulator while their conduct is regulated by
another.
The Prudential Regulation Authority (the “PRA”) is responsible for prudential regulation while the FCA is
responsible for market conduct regulation. The FCA is also responsible for the prudential regulation of
financial service firms that are not regulated by the PRA.
The FCA is responsible for the prudential supervision of FCA authorized lenders that are not prudentially
regulated by the PRA. The FCA assesses firms’ capital adequacy in order to ensure the financial viability
of the firms and to ensure the continuity of their service provision through the economic cycle.
5.11.1.3 Licensing
The FCA’s authorization is needed for consumer credit activities. Two authorization regimes currently
exist, with higher-risk consumer credit activities such as consumer credit lending and peer to peer lending
requiring the full credit authorization regime, while lower-risk activities such as leasing, hire purchase and
other non-financial services require a limited permission regime.

Consumer lending is ordinarily carried out by private limited companies. There is, however, no specific
form that the company must take.
Firms that operate electronic systems in relation to lending must hold a minimum capital equal to either a
percentage of the loaned funds or a fixed minimum of £50,000 (approx. 68,130 USD or 7,508,000 KES),
whichever is higher45.
Under the various prudential regulations under the FCA Handbook, however, minimum capital
requirements are determined on a risk-based basis depending on the risk profile of the firm and its ability
to remain solvent. The amount, as well as the suitability of the assets (e.g. with respect to the liquidity of
the assets) is considered when determining the adequacy of the assets.
44 36H – Operating an electronic system in relation to lending

45
Chapter 12 - Interim Prudential Sourcebook for Investment Business (IPRU (INV))
40
There are no local shareholding requirements or board composition requirement.

There are no specific regulations on the financing models to be adopted by digital lenders.

The FCA does not generally control the interest rates on loans issued by consumer credit lenders.
However, there is an exception in the case of certain products – HCSTC, also known as “payday loans”
where the FCA controls the interest rate and the default fees. HCSTC are loans whose annualized
percentage rate (APR) is equal to or exceeds 100%.
At the point of authorization by FCA, however, the specific lender must inform the FCA if it intends to
issue HCSTC.
Under chapter 5A of the Consumer Credit Sourcebook (CONC), HCSTC loans are limited in several ways:
o a 0.8% cap on interest and fees per day;
o a £15 (approx. 20 USD) cap on default fees; a total cost cap of 100% of the principal
amount disbursed; and
o HCSTC loan cannot be rolled over more than 2 times.

See 5.11.4.1 above.
The in duplum rule applies to digital loans. Under Chapter 5A of the Consumer Credit Sourcebook, there
is a total cost cap of 100% of the principal amount disbursed.

The price cap on HCSTC loans set out in 5.11.4.1 includes debt collection and debt administration.
Debt collectors are precluded from acting in a manner that would reasonably be considered threatening
to debtors. There is also in place a prescribed form and content of standard debt collection letters
produced by the Credit Services Association/Debt Buyers and Sellers Group (CSA/DBSG) in association
with the Office of Fair Trading (“OFT”) and can be found on the OFT website46.
There is no prohibition for digital lenders on ability to provide information to authorized credit information
service providers. This fosters an environment of transparency and reduces the risk associated with
digital lending.
There is no prohibition on digital lenders’ ability to provide information to authorized credit information
service providers.
46 http://www.oft.gov.uk/shared_oft/business_leaflets/consumer_credit/debt-letters.pdf
41
Advertising a service that is considered a regulated activity under the RAO is considered advice under
Article 53 of the RAO. The medium used to give the advice or information is irrelevant but there are
distinctions made between different kinds of advertising communication and different standards applied to
the different categories.
CONC 3.3 requires that a lender must ensure that any communication or financial promotion is clear, fair,
and not misleading. The advertisement should not, in any way, imply that credit shall be available to the
prospective borrower regardless of their circumstances.
CONC 3.4 provides that a firm must not communicate an advertisement relating to HCSTC unless it
contains the following warning:
“Warning: Late repayment can cause you serious money problems. For help, go to
moneyadviceservice.org.uk”

CONC 11.2 provides consumers with the right to withdraw from credit agreements without cause and
without penalty within the first 14 days of entering into the credit agreement (or receiving the terms and
conditions of the service, if these are provided at a later date). The lender must disclose to the consumer
in good time before, or if that is not possible, immediately after the consumer is bound by the contract to
which the right to cancel applies.
The borrower must repay to the firm any credit provided and any interest accrued until the date of the
cancellation but shall not be liable to pay any compensation, fees or charges, except non-refundable
charges paid by the lender to a public administrative body.
The UK has a Financial Ombudsman Service (FOS) that caters to consumer complaints across the
financial service industry.
The dispute resolution process is governed by the Dispute Resolution rules in the FCA Handbook and the
Consumer Redress rules. These instruments set out in great detail the jurisdiction of the FOS, the
procedures to be followed for different kinds of disputes and the awards that the FOS may give.

Data protection in the UK is governed by the Data Protection Act, 2018. There is a prohibition on the
processing of personal data without a lawful basis for the processing. Lawful bases for processing include
consent of the data subject, contractual obligations and compliance with legal obligations.
The UK has a Computer Misuse Act which governs cybersecurity issues. Its provisions are quite broad and
prohibit any unauthorized access to a computer system. The punishment for such unauthorized access,
however, is far from deterrent as it limits the prison term on conviction to a maximum of 12 months.
42
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations
201747 (the MLTFR) sets out minimum Customer Due Diligence (CDD) and Enhanced Due Diligence
requirements for customers of credit providers. Credit institutions are considered to be “Relevant
Persons” for purposes of the application of the MLTFR.
47 Section 8(2) Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017
43
5.12 SINGAPORE
5.12.1 INTRODUCTORY
Non-bank money lenders in Singapore are regulated under the Moneylenders Act (cap 188) (the “SMLA”)
and its subsidiary legislation. The SMLA defines a money lender as any person who lends a sum of
money in consideration of a larger sum being repaid. The SMLA requires any person carrying on the
business of a moneylender to be licensed.
5.12.1.2 Regulator
The regulatory authority under the SMLA is the Registry of Moneylenders, headed by a Registrar
appointed by the Minister of Law.
5.12.1.3 Licensing
Non-deposit taking non-bank money lenders are required to be licensed under the SMLA.

The SMLA does not restrict the form of the company but requires that any person applying for or holding
a moneylender’s license be a company.
The Moneylenders Rules (the “Rules”) prescribe a minimum paid-up capital for licensees. The current
minimum is SGD 100,000 (approx. 75,210 USD or 8,288,238 KES).

There are no local shareholding requirements for a moneylender’s license.

The are no specific regulations on board composition.
The Registrar, however, may refuse to renew a license under certain circumstances:
• if any director or member of the management is below 21 years of age;

• if a director, substantial shareholder, or member of the management:
o has been convicted of an offence involving dishonesty or moral turpitude;
o has been convicted of any offence under sections 43 to 48 of the Corruption, Drug
Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (Cap. 65A), the
Terrorism (Suppression of Financing) Act (Cap. 325) or any regulation made under the
United Nations Act (Cap. 339);
o is contravening or has contravened any provision of the SMLA;
o has been convicted of any offence under the SMLA; or
o is carrying on or has carried on any business of moneylending, in Singapore or elsewhere,
in such a manner as renders him unfit to hold a licence;
• if the Registrar is not satisfied as to the good character of any director or substantial shareholder;
• if the Registrar is not satisfied that the applicant, a director, a member of the management or a
substantial shareholder is a fit and proper person to carry on the business;

There are no restrictions on any financing models under the SMLA and its subsidiary legislation.
44
The SMLA provides for the prescription of a maximum rate of interest or late interest. The rate is to be
prescribed by the Minister and is currently limited to a nominal rate of 4% per month.
The Rules provide that late interest shall also be capped to a nominal interest rate of 4% per month and
may only be computed on the outstanding balance that has fallen due and remains unpaid.
The SMLA provides that the types and amounts of fees to be charged on a loan are to be prescribed by
the Minister for Law. A cap has been placed on the permitted fees under the rules for late payment fees
(not more than $60) and fees payable at the grant of the loan (capped at 10% of the principal amount).
There is no cap on the legal costs incurred for the recovery of the loan as prescribed by the court.
It must be noted that any fees charged by the moneylender aside from the permitted fees are not
enforceable in a court of law.
Lenders are restricted from recovering an aggregate amount, including interest, late interest and any
other permitted fees, exceeding the principal of the loan.
There is no specific debt collection regulation in Singapore. In addition, there is no cap on the legal
costs incurred for the recovery of a loan.

There is no special designation of credit data providers, but any licensed credit bureau must enter into a
contract with the data provider in order to safeguard the integrity of the data provided.
The ability of data providers to list defaulting customers is based on the contract entered into with the
Credit Bureau.

5.12.6.1 Mandatory information
Money lenders are prohibited from issuing any advertising material which:
o does not state the business name of the lender;
o states the business name in an inconspicuous manner;
o states that loans are offered at a specified percentage of interest without stating the rate
of the interest, and that the actual rate of interest charged is nor annualized;
o states that the lender offers loans at a specified rate of interest, but the actual interest
rate charged is higher; or
o states that the licensee offers loans at a specified interest rate, without stating any
conditions that the loan may be subject to.
5.12.6.2 Restrictions on advertising media

There are no restrictions on the advertising media.
45
The lender is allowed to charge a fee for early redemption of a term loan or early termination of the
contract for any other loan. This is an implicit indication that the borrower may cancel a loan.
5.12.8 CONSUMER COMPLAINT PROCESS
There is no consumer complaint process outlined under the SMLA or any subsidiary legislation.

Neither the SMLA nor the subsidiary legislation provides for a dispute resolution process.

The Personal Data Protection Act, 2012 allows for the collection of personal data without consent for debt
recovery and for credit rating purposes without the consent of the data subject. However, there is a
general prohibition on the collection and processing of data without the consent of the data subject.

Singapore anti-money laundering legislation directly applies to financial institutions and deposit taking
institutions, thereby ensuring that all digital lenders are held to a high standard of compliance to prevent
money laundering or terrorism financing. Anti-money laundering in relation to moneylending licensees is
regulated by the Moneylenders (Prevention of Money Laundering and Financing of Terrorism) Rules 2009
for moneylenders.
In addition, the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act
requires that records of customer identification be kept by financial institutions.
46
6 Conclusion and Recommendations
Summary of observations:
From the discussion above, a number of key conclusions can be drawn regarding the regulation applicable to
the digital lending sector in various markets across the world. These conclusions are outlined below.
Specific regulation of digital lending does not appear to be common. In most of the countries that we
reviewed, the regulatory frameworks in these countries have generally not distinguished between digital
lenders and other types of lenders. Consequently, digital lenders are either unregulated or are regulated
under more general laws such as consumer credit laws, money lending laws, microfinance laws,
consumer protections laws and so on.
In all of the countries we reviewed there is a specific regulator in place to oversee and enforce the relevant
regulatory regime under which digital lenders operate. In 2 of the 11 countries, the relevant regulator is the
central bank (India and Nigeria). In 6 of the 11 countries, the regulator is a financial services regulator other
than the central bank (Australia, Mexico, UK, South Africa, Uganda and Egypt). In 3 of the 11 countries (Poland
and Spain), the relevant regulators are the agencies that supervise competition and consumer protection
matters in that country. In Singapore, the regulator is a registrar specifically established under the country’s
moneylending legislation to licence moneylenders. This demonstrates that, while central banks are a
reasonable choice to supervise consumer credit markets, it is possible to vest such supervision in other
government agencies, as is the case in a majority of the countries under review.
Governments have a variety of regulatory models under which digital lending can be supervised within a
broader consumer finance regulatory framework. From our study, some of the regulatory models we have
identified include:
• Supervision under national consumer credit laws e.g. Australia and South Africa;
• Supervision under microfinance or moneylending laws e.g. Egypt, Uganda and Singapore;
• Supervision under financial conduct or consumer protection laws e.g. UK, Poland, Mexico and
Spain; and
• Supervision under general consumer finance laws e.g. India and Nigeria.
Licensing or regulatory authorization is a common feature of the regulatory model in all of the countries
that we reviewed, meaning that digital lenders in those countries would not be able to carry on lending
activities without a licence or other authorization (or an exemption/exclusion from regulation).
In some of the countries where there is a formal licensing regime, the regulatory framework also tends to
prescribe requirements regarding minimum capital requirements (Uganda, India, Nigeria, UK and
Poland). None of the sample countries have prescribed local shareholding requirements.
Some of the countries have set thresholds for formal regulation, meaning that if a digital lender (or other
provider of consumer credit) does not meet the threshold, certain aspects of the regulation are not
applicable. For example:
- Australia’s National Credit Code does not apply to low cost short-term credit of less than 62 days
tenor; and
- In the UK, certain aspects of the CONC are not applied to HCSTC loans.
While some countries tend to place a cap on interest rates, the caps are only applicable past a certain
threshold. The reason for this is mainly the business reality of short-term loans, which is greatly affected by the
risk attached to providing such loans. While the market has emerged for such loans, institutional lenders avoid
them because of the risk limits dictated by the prudential guidelines that they are subject to. With this in mind,
the majority of countries do not place any restrictions on interest rates for high cost short term
47
loans. There is, however, a pattern of consumer protection provisions in most jurisdictions requiring
transparency in the information provided to prospective borrowers. Such a framework is advisable as it
balances between the viability of the business for the lenders, and the interests of the borrowers.
All the countries in the study provide some level of consumer protection. Common consumer (borrower)
rights granted under the regulatory regimes include cooling off rights; right to early repayment of loans;
restrictions on lenders unilaterally cancelling loans; and restrictions on unreasonable clauses in loan
contracts. The majority of countries do not prescribe specific restrictions on debt collection expenses or
practices.
All the countries in the review have established credit information sharing mechanisms (credit reference
bureaus). The countries allow credit providers (including digital lenders) to access borrower credit
information and also list defaulting borrowers. This helps businesses in managing the risk of default as it
provides more accurate information relating to prospective borrowers’ indebtedness, while indirectly
helping borrowers by restricting additional provision of credit to those who are overly indebted.
A number of countries have prescribed marketing guidelines/restrictions in relation to credit products,

which require key terms (such as interests and fees) or key risks to be disclosed to consumers (e.g.
Australia, Nigeria, Mexico, Poland, Spain, UK and Singapore).
Almost all of the countries have enacted local data protection and privacy laws, which can be relied on to
protect the personal data of consumers, which is collected and processed by the credit providers.
All of the countries have put in place laws to curb money-laundering and these laws are applicable to
digital lenders.
We noted variations in dispute resolution mechanisms. Australia, UK, Spain and Poland have established
Financial Ombudsmen to deal with consumer complaints against credit providers. Countries like Uganda
and Egypt do not have specialized agencies for consumer dispute resolution. Other countries provide for
consumer complaints to be lodged with the primary regulator (India and South Africa).
Recommended regulatory framework for Kenya:
Majority of the countries we reviewed had licensing as a core feature of the regulatory framework, which
implies that governments see licensing as an effective means of enforcing supervision in the financial
services sector. However, the case of Poland illustrates that licensing may not be necessary where there
is an effective consumer protection regime that can be enforced against lenders by a supervisory agency
such as the consumer protection and competition regulator. However, non-bank lenders in Poland must
be entered in the special register lenders institutions. This is particularly relevant to digital lenders which
raise funds privately rather than through deposits from consumers. The concern with using a licensing
regime to regulate a nascent industry such as non-deposit taking digital lending is that stringent rules on
minimum capital requirements, financial adequacy, reporting, local shareholding requirements and so on,
would impose significant compliance costs on participants. The majority of unregulated digital lenders in
Kenya are lean start-ups, which are funded by shareholder/investor funds. Onerous compliance costs and
bureaucracy would affect the viability of these entities and they may not survive over the longer term,
which would stifle innovation and rob consumers of their products a convenient and reliable means of
accessing finance.
In light of the emerging nature of the non-deposit taking digital lending industry in Kenya, we would not
recommend a complicated licensing framework specific to the industry. In our view, a more appropriate
regulatory model would be one that enhances consumer protection through regulation of the conduct of
credit providers (digital lenders and others). This can be achieved through the development and
enactment of a consumer credit code that embeds the principles of consumer protection in lending. All
non-deposit taking providers of credit to the public, regardless of their business model, would be bound
by a set of consumer protection principles. We recommend that the enforcement of the consumer credit
code be vested in a regulator, which may be the Central Bank or another agency with a strong consumer
protection mandate (for example, the Competition Authority or a specialized consumer protection agency
similar to the NCR in South Africa). The code should provide for registration, but not necessarily licensing,
of consumer credit providers (including digital lenders) to make it easier for the relevant regulator to
monitor their conduct and take enforcement action in the event of a violation of the code.
48
Based on our study, some of the key consumer protection principles that should be embedded in the
proposed consumer credit code include: (i) transparency and fairness in dealings with consumers; (ii)
transparent pricing principles (iii) disclosure of key terms and conditions; (v) restrictions on certain debt
collection practices; (vi) credit information reporting; (viii) marketing guidelines for consumer credit
products; and (x) complaints handling and dispute resolution.
With respect to dispute resolution, some countries have introduced administrative agencies to handle and
resolve consumer complaints against consumer credit providers. For example, Australia has established
the Australian Financial Complaints Authority (AFCA) while Poland and the UK both have Financial
Ombudsmen. We would recommend that such a dispute resolution mechanism be considered for Kenya
to assist with resolution of consumer disputes with consumer credit providers, particularly where the
disputes to not warrant more complicated and expensive dispute resolution options such as litigation. The
Ombudsman would liaise with the primary regulatory (e.g. the Central Bank) particularly with respect to
serious or sustained violations of the code by a consumer credit provider. Technology could be adopted
by the Ombudsman to facilitate faster and more efficient dispute resolution through use of online dispute
resolution tools. Online Dispute Resolution (ODR), as has been used in the European Union, is often
referred as a form of alternative dispute resolution which takes advantage of the speed and convenience
of the Internet and information and communication technology. ODR is the best (and often the only)
option for enhancing the redress of consumer grievances and strengthening their trust in the market.48
This form of dispute resolution can also be used to address disputes that occur through digital platforms
such as e-commerce sites and/or applications.
While we are comfortable that our recommended regulatory model would strike the appropriate balance
between promoting innovation and protecting consumers, we acknowledge that further detailed
consultations with a broad range of stakeholders (Parliament, National Treasury, Central Bank, DLAK,
COFEK and the wider public) would need to be conducted before a decision can be made regarding the
final regulatory model to be adopted.
48 Whatshould the ideal ODR system for e-commerce consumers look like? The Hidden World of Consumer ADR: Redress
and Behaviour, CLS Oxford, 28 October 2011
49
APPENDICES
APPENDIX 1: List of Abbreviations
Abbreviation Meaning
ACCC Australian Competition and Consumer Commission
ACL Australian Credit License
AFCA Australian Financial Complaints Authority
AML Anti-Money Laundering
AMLA Anti-Money Laundering Act, 2013 (Uganda)
AMLCTFA Anti-money Laundering and Counter-Terrorism Financing Act, 2006

(Australia)
APR Annual Percentage Rate
ASIC Australia Securities and Investments Commission
AUD Australian Dollar
AUSTRAC Australian Transaction Reports and Analysis Centre
B2B Business to Business
B2C Business to Consumer
the Bill The Central Bank of Kenya (Amendment) Bill, 2020
BoU Bank of Uganda
CBK Central Bank of Kenya
CBN Central Bank of Nigeria
CCA Consumer Credit Act (UK)
CDD Consumer Due Diligence
CIC Credit Information Company
CIR Central de Información de Riesgos (Spain’s Risk Information Centre)
CMA-U Computer Misuse Act, 2011 (Uganda)
CNBV Comisión Nacional Bancaria y de Valores (Mexico’s Banking and Securities

Commission)
COFEK Consumers Federation of Kenya
CONC Consumer Credit Sourcebook
CONDUSEF Comisión Nacional para la Defensa de los Usuarios de las Instituciones

Financieras (the Mexican National Commission for the Decense of Users of
Financial Institutions)
CPR Consumer Protection Regulations, 2019 (Nigeria)
CRB Credit Reference Bureau
CRB Regulations Financial Institutions (Credit Reference Bureaus) Regulations, 2005

(Uganda)
CRC Cyber Response Committee (South Africa)
DLAK Digital Lenders Association of Kenya
50
DMB Deposit Money Bank
EDD Enhanced Due Diligence
EGP Egyptian Pound
ESA-U Electronic Signatures Act (Uganda)
ETA-U Electronic Transactions Act (Uganda)
EU European Union
EUR Euro
FC Financial Company (Nigeria)
FCA Financial Conduct Authority (UK)
FCE Financial Credit Establishment
FICA Financial Intelligence Centre Act (South Africa)
Fintech Law Financial Technology Institutions Law (Mexico)
FOS Financial Ombudsman Service (UK)
FRA Financial Regulatory Authority (Egypt)
FSMA Financial Services and Markets Act (UK)
GDPR General Data Protection Regulation (EU)
GIFI General Inspector of Financial Information (Poland)
HCSTC High Cost Short Term Credit
INR Indian Rupee
IPRU (INV) Interim Prudential Sourcebook for Investment Business (UK)
ITU International Telecommunications Union
KES Kenyan Shilling
KYC Know Your Customer
MFI Microfinance Institution
MLTFR Money Laundering, Terrorist Financing and Transfer of Funds (Information

on the Payer) Regulations (UK)
MSME Micro, Small and Medium Enterprises
NBFC Non-bank Financial Company
NCA National Credit Act (South Africa)
NCC National Credit Code (Australia)
NCCPA National Consumer Credit Protection Act, 2009 (Australia)
NCR National Credit Regulator (South Africa)
NCT National Consumer Tribunal (South Africa)
NDPR Nigeria Data Protection Regulations 2019
NITAA National Information Technology Authority Act, 2009 (Uganda)
NITA-U National Information Technology Authority (Uganda)
ODR Online Dispute Resolution
51
OECD Organisation of Economic Co-operation and Development
OFT Office of Fair Trading (UK)
P2P Peer to Peer
PDA Personal Data Protection Law (Egypt)
PLN Polish Zloty
POCA Prevention of Crime Act (South Africa)
POPIA Processing of Personal Information Act (South Africa)
PRA Prudential Regulation Authority (UK)
PSP Payment Service Provider
R South African Rand
RAO Financial Services and Markets Act (Regulated Activities) Order (UK)
RBI Reserve Bank of India
RICA Regulation of Interception of Communications Act (Uganda)
SGD Singaporean Dollar
SME Small and Medium Enterprises
SMLA Moneylenders Act (Singapore)
SOFOM Sociedad Financiera de Objeto Multiple (Multipurpose Financial Entity)
UK United Kingdom
UMRA Uganda Microfinance Regulatory Authority
USD United States Dollar
52
APPENDIX 2: Glossary
Term Meaning
Ancillary fees Non-interest charges and fees chargeable on a loan
APR The actual annual cost of a loan if taken continuously for the entire
year. The cost includes interest, fees and other charges on the loan
Credit Information Companies which collect information on the credit transactions of
Services individuals and make such information available in the form of credit
reports or credit ratings
High Cost Short (UK) Loans offered over a relatively short term with high APR (at least
Term Credit 100%)
In duplum rule Doctrine limiting the amount recoverable from a non-performing loan to
a maximum of double the outstanding principal amount.
Local Shareholding The requirement, as is the case in some regulated industries, that part
requirement of the ownership of the company be held by a national of the country.
Microfinance A category of financial services targeting individuals and small
businesses who lack access to conventional banking and related
services.
Nominal interest rate The interest rate stated without adjusting for inflation or compounding.
Non-bank lender A financial entity that offers lending services but does not hold a
banking license and is therefore not entitled to take customer deposits.
Ombudsman An official appointed to investigate individuals' complaints against a
company or organization.
Prudential A type of financial regulation that requires financial firms to control risks
Regulation and hold adequate capital as defined by the various threshold set out
by the prudential regulator.
53
APPENDIX 3: Summary of Comparative Study
Australia Egypt Uganda India Mexico Nigeria

Mexican Central Bank
(CNBV);
National Banking and
Securities Commission
Regulator Australian Securities and - Comisión Nacional
Investments Commission Financial Regulatory Reserve Bank of Bancaria y de Valores Central Bank of
(ASIC) Authority UMRA India (RBI) (CNBV) Nigeria (CBN)
No License.
Authorisation as an
unregulated
multipurpose financial
License Yes entity (SOFOM-ENR)
required Australian Credit License Yes Yes operating an "innovative
(ACL) Yes model" Yes
Non-banking finance SOFOM (Multi-purpose
Business Form Credit Provider Credit institution Microfinance Institution company financial entity) Finance company
Lender Digital lenders take the Lender must be a limited Lender must take the Lender must be Lender must be
company Lender may be a sole form of a joint stock liability company form of a private incorporated as a incorporated as a
requirements proprietor, a partnership company limited company or a sociedad financiera limited company with
No minimum share
or a company public limited de objeto multiple only one object -
Minimum share capital capital requirement
company. (SOFOM) engaging in the
of approx. USD 640,000
No minimum share No mandatory board business of a Finance
Minimum share No minimum capital
capital. The company must structure Company.
capital of approx. requirements.
have a minimum of 7
No mandatory board USD 274,000
directors No mandatory board Minimum share capital
structure.
structure. of approx. USD
Company must have
262,000
at least 2 directors
and at least 50% of
Board must have a
the directors should
minimum of 5 and a
have relevant finance
maximum of 9
background.
directors. A minimum
of 1 and a maximum of
2 must be independent
54
directors and at least
50% of the Board must
be non-executive.
No interest rate
controls for Finance
Companies.
Allowed fees Ancillary fees are

Establishment fee however capped by
capped at 20% of loan the CBN. Currently:
amount; Facility restructuring
Monthly account keeping fees capped at 0.5% of
fee capped at 4% of loan The BoM is empowered outstanding amount;
amount; to set limits on interest management fees at
Default fees; rates and commissions. 1% of the principal
Government Fees and amount (one-off);
Enforcement expenses Some general principles renewal fees capped
with respect to the fees: at 0.5%; default fees
For loans of between institutions may not capped at 1% of
AUD 2,001 and 5,000, charge more than one unpaid instalments per
allowed fees are a fee per event; month; commitment
maximum annual interest no fees are applicable fees capped at 1% of
of 48% and/ or an for cancellation of undisbursed amount
establishment fee (one- Minister of Finance may financial services; and advisory fees only
off) of AUD 400 set interest rate cap. No pricing regulation. fees must be properly applicable where there
Currently, however, there However, the pricing registered and is a written
Pricing For loans above AUD are no interest rate caps. model in use must be published advisory/consultancy
regulation 5,000, maximum cost of There is no maximum approved by the fees may not be altered agreement between
credit capped at 48% interest rate. No cap on ancillary fees. board. without notification. lender and borrower.
Debt collection
regulation No restriction on debt No restriction on debt No restriction on debt No restriction on debt No restriction on debt No restriction on debt
collection expenses collection expenses collection expenses collection expenses collection expenses collection expenses
All lenders are
Credit Lenders may only members of credit
information Lender can send and Lenders may access receive information from information Lenders are free to Lenders may submit
reports/access receive reports from credit information with CRBs on written companies and may share and receive credit and receive
Credit Information the consent of the authorisation of the send and receive information from credit information from Credit
providers. customers creditor credit information reference bureaus Reference Bureaus
55
Advertisements must
have warning
information indicating:
variable interests,
where relevant;
commission applicable
to the user and
applicable conditions;
the fact that exceeding
one’s capacity to pay
shall affect one’s credit
history;
the fact that guarantors
will be responsible for The overall impression
the payment of the of advertisements shall
whole amount if it falls not overly emphasize
due; the benefits of the
the fact that loans product while de-
There is a mandatory provided in foreign emphasizing its
warning that shall currency or investment associated risks.
accompany any units (UDIs) will vary The costs of the
advertisement if the according to the product or services
Marketing advertisement contains exchange rate or the must also be
Guidelines the applicable interest index of reference for disclosed, including all
rate. No restrictions No restrictions No restrictions the UDIs. fees and charges.
Consumer Consumers of financial
protection The Australian Financial Consumer Protection services are protected
regulations complaints Authority provisions are set out in No specific provisions on No specific provisions Consumer Protection by the Consumer
(AFCA) is responsible for the Consumer Finance financial consumer on financial consumer generally overseen by Protection Regulations
consumer complaints law. protection protection CONDUSEF 2019
No dispute resolution Each lender shall put A consumer shall lodge
process set out in in place a Board complaints with
statute, but lender must approved policy to CONDUSEF, which No dispute resolution
put in place a system to address consumer places a moratorium on process specified in
deal with consumer complaints. any court action until statute, but the FCs
Legal Disputes are dealt with complaints. Each Complaints that have the proceedings at must have a set out
proceedings by the Australia Financial complaint must be not been settled after CONDUSEF are process before the
regulation Complaints Authority decided on within a No dispute resolution a month may be concluded. commencement of
(AFCA) week. process set out in statute appealed to the operations
56
Customer Education The consumer may
and Protection then file their claims in
department of the RBI court.
Poland South Africa Spain United Kingdom Singapore

Regulator
Office of Competition and National Credit Regulator Financial Conduct Authority
Consumer Protection (NCR) N/A (FCA) Registry of Moneylenders
No license.
License required No license. Yes Registration with the Ministry
Registration in the Lending National Credit License of Economy (for non-banking No license.
Institutions Registry (NCL) lenders) FCA authorisation. Yes
Business registered under
Business Form Lending institution Credit provider Commercial Register Consumer credit provider Moneylender
Lender company Lender must be a limited No limitation on legal form. No limitation on the legal There is no specific form that The moneylender must be a
requirements liability company or a joint form the company must take. limited company
No minimum capital
stock company;
requirements No minimum capital Minimum share capital of Minimum share capital of
No local shareholding requirements approx. USD 68,000. The SGD 100,000 (approx. USD
Minimum capital of
requirements No mandatory board minimum requirement may, 75,200)
approximately 54,000 USD.
structure however, be adjusted on a
The capital may not come No mandatory board
risk-based basis. No local shareholding
from credit, loans, issue of composition requirements
requirements.
bonds or undocumented No mandatory board
sources; structure.
All directors must be at least
21 years old and must be fit
No local shareholding
and proper to carry on the
requirements;
business of moneylending
No special requirements on
Board composition
Maximum initiation fee of HCSTC loans have the Interest rate currently limited
There is a cap on fees and
approx. 11 USD per credit following caps: to a nominal rate of 4% per
commissions calculated
agreement plus 10% of the 0.8% cap on interest and month.
using a prescribed formula;
Pricing amount in excess of R 1,000 No interest rate controls, the fees per day
regulation (approx. 66 USD) but market determines the 15 GBP (approx. 20 USD) Fees payable at the grant of
capped at R 1,050 (approx. interest rate cap on default fees a loan are capped at 10% of
57
where K is the loan amount, 69.5 USD)49 Total cost cap of 100% of the principal amount, late
n is the term of the loan (in the loan amount. payment fees are capped to
days) and R is the number of Interest rate capped at 5% SGD 60 (approx. 45 USD).
days in the year. per month for first agreement HCSTC loans may only be Fees charged apart from
and 3% per month for rolled over a maximum of these are not enforceable in
There is also a contractual subsequent loans in a twice in a year court
interest cap that may not calendar year.
exceed twice the amount of Lenders are also restricted
statutory interest, which is Service fee capped at from recovering an
currently 3,6%. As such the approx. 4 USD per month. aggregate amount
maximum interest is 7,2% exceeding the principal
amount of the loan
Debt collection costs are Initiation fees and collection

included in the ancillary fees costs that accrue during the
cap. Maximum penalty time a customer is in default
interest is capped at twice may not, in aggregate,
Debt collection the rate of statutory penalty exceed the unpaid balance No specific debt collection
regulation interest, which is 5,6%. As of the principal debt of the regulation and no cap on the
such, penalty interest is credit agreement at the time No specific restriction on The loan is subject to the legal costs incurred in the
capped at 11,2% that the default occurs. debt collection expenses total cost cap of 100% recovery of a loan
There is no limitation on
Credit digital lenders' ability to Moneylenders may send and
information Lending institutions are Lenders are entitled to There is no limitation on provide and receive receive information from
reports/access obliged to report data to provide information and digital lender’s ability to information from credit credit bureaus subject to a
credit bureaus and are receive information from provide information to the information service contract entered between
entitled to receive reports credit bureaus CIR. providers. the two parties.
A firm must not Moneylenders are prohibited
Lenders must provide communicate an from issuing marketing
information on interest rate advertisement relating to material that:
and fees; annual percentage HCSTC unless it has the
Marketing rate and total credit amount following warning: does not state the name of
Guidelines in a clear, understandable the lender;
and visible manner in their “Warning: Late repayment states the name in an
advertisements No marketing guidelines No marketing guidelines can cause you serious inconspicuous manner;
49
Regulations on Review of Limitations on Fees and Interest Rates, available at
https://www.gov.za/sites/default/files/gcis_document/201511/39379gon1080.pdf
58
money problems. For help, states the interest rate
go to without stating whether the
moneyadviceservice.org.u rate is annualized or not;
k” states a false interest rate; or
states the interest rate
without stating any
conditions that the loan shall
be subject to.
Consumer protection
regulation are implemented
in numerous acts for
instance: Consumer Credit Consumer Protection
Act, the Act on Competition provisions included within
and Consumer Protection. Consumer protection is Consumer protection is CONC
There is a Financial mostly regulated by the regulated by the Ley General
Consumer Ombudsman who may take National Credit Act para la Defensa de los There is a Financial
protection legal action on behalf of The National Consumer Derechos de los Ombudsman Service that
regulations customers in cases Tribunal conducts hearings Consumidores y Usuarios caters to consumer Consumer protection
concerning unfair market into complaints under the (the Spanish Consumer complaints across the provisions included in the
practices. NCA Protection Act) financial service industry Moneylenders Act
The borrower and lender

may submit their conflicts to
There is a financial services arbitration or other
Ombudsman to address alternative dispute
consumer complaints around A consumer may either resolution. The dispute resolution
Legal financial services. In addition, pursue Alternative dispute process is governed by the
proceedings the lender may pursue its resolution, for resolution by A complaint may also be Dispute Resolution Rules
regulation claims through ordinary court conciliation, mediation or submitted to the (DISP) and the Consumer
proceedings or electronic arbitration; or may initiate a Ombudsman (Defensor del Redress (CONRED) rules in No dispute resolution
court proceedings (on-line). complaint with the NCR Pueblo) the FCA Handbook process set out in statute
59
APPENDIX 3: Comparative Cost of Credit
For purposes of easing the comparison we have used an example of client taking a USD 100 loan for a tenor of 30 days in all the jurisdictions. Readers of the study are
able to see what is the maximum level of Interest and Maximum level of fees that is allowed in the country for a loan of USD 100 for a tenor of 30 days. Totals at the end
represent what the client has to repay to the lender after 30 days (Loan principle of USD 100 + Interest and/or fees). We have assumed that the loan will be repaid at the
due date.
Country Australia Egypt Uganda India Mexico

Loan (in 100 100 100 100 100
USD)
Maximum n/a There is no maximum There is no maximum There is no maximum interest There is no maximum interest rate
Allowed interest rate regulation. interest rate regulation. rate regulation. Interest regulation. Interest charged by
Interest Interest charged by Interest charged by lenders charged by lenders is market lenders is market driven
Rate lenders is market driven is market driven driven
charged for
a 30 days
loan (in
USD)
Maximum 24 There is no maximum fees There is no maximum fees There is no maximum fees rate There is no maximum fees rate
Fees rate regulation. Fees rate regulation. Fees regulation. Fees charged by regulation. Fees charged by
Allowed charged by lenders are charged by lenders are lenders are market driven lenders are market driven
charged for market driven market driven
a 30 days
loan (in
USD)
Total 124 The interest and fees The interest and fees The interest and fees charged The interest and fees charged on
charged (in charged on the loan are charged on the loan are not on the loan are not regulated. the loan are not regulated. Interest
USD) not regulated. Interest and regulated. Interest and fees Interest and fees charged by and fees charged by lenders are
fees charged by lenders charged by lenders are lenders are market driven market driven
are market driven market driven
60
Country Nigeria Republic of South Poland Spain United Kingdom Singapore
Africa
Loan (in 100 100 100 100 100 100
USD)
Maximum There is no 5 0.6 There is no maximum n/a 4
Allowed maximum interest interest rate regulation.
Interest rate regulation. Interest charged by
Rate Interest charged by lenders is market
charged for lenders is market driven
a 30 days driven and reflects
loan (in the risk-based
USD) pricing model
Maximum 1 18.34 27.47 There is no maximum 24 10
Fees fees rate regulation.
Allowed Fees charged by lenders
charged for are market driven
a 30 days
loan (in
USD)
Total The interest charged 123.34 128.07 The interest and fees 124 114
charged (in on the loan is not charged on the loan are
USD) regulated. Interest not regulated. Interest
charged by lenders and fees charged by
is market driven lenders are market
and reflects the driven
risk-based pricing
model
61
© 2021 PricewaterhouseCoopers Limited. All rights reserved. In this document, “PwC” refers to
PricewaterhouseCoopers Limited which is a member firm of PricewaterhouseCoopers International Limited,
each member firm of which is a separate legal entity.
62

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A Comparative Study on

The report is divided into several sections:

o The type of Regulator;

o Licensing requirements (if any);

o Credit information sharing;

o Debt collection restrictions;

o Consumer protection regulations;

o Dispute resolution mechanisms;

o Data protection and cybersecurity requirements; and

o Financial crime regulation.

o United Kingdom; and

4.1 Overview of the digital lending landscape in Kenya

4.2 Best practice principles for effective and efficient regulation

According to the International Telecommunications Union4, the formulation of regulatory policy on

Broader categorization Regulatory issue Brief description of regulatory

Product disclosure Transparency of fees, charges,

Customer redress • Redress procedure

Consumer over- Lending amount limits

Systemic risk Licensing and reporting • License requirements

Lending prohibition Prohibits lending from certain types

Regulatory sandboxes Allow organizations to experiment

4 ITU (2016). The Digital financial services ecosystem. Technical Report.

Capital requirements • Equity in relation to debt

Governance requirements • Managing financial risk

ii. Have a sound legal and empirical basis

iv. Minimise costs and market distortions

v. Promote innovation through market incentives and goal-based approaches

vi. Be clear, simple and practical for users

vii. Be consistent with other regulations and policies

4.3 The gaps in Kenya’s digital lending regulation

a. making false, misleading or deceptive representations;

5 OECD Guiding Principles for Regulatory Quality and Performance (2005)

8 Section 13 (1) of the Consumer Protection Act, 2012

5.2.1.1 Scope of regulation

5.2.2 CORPORATE STRUCTURE REGULATION

5.2.2.1 Legal form of the credit provider

There are no specific capital requirements applicable to the lender.

5.2.2.3 Local shareholding requirements

5.2.2.4 Board composition

5.2.2.5 Allowed financing models

5.2.3.1 Interest rate control

o An establishment fee (one-off) capped at 20% of the loan amount.

o A monthly account keeping fee capped at 4% of the loan amount

o Default fees (subject to 5.2.3.3 below)

5.2.3.2 Control over ancillary fees

See 5.2.3.1 above.

5.2.3.3 In duplum rule applicability

This restriction does not apply to enforcement expenses.

5.2.4 DEBT COLLECTION REGULATION

Debt collectors are specifically prohibited from:

o harassing debtors to an unreasonable extent

20 Section 31A National Consumer Credit Protection Act 2009

5.2.5 CREDIT INFORMATION REPORTS/ACCESS

5.2.5.1 Designation of digital lenders as third-party credit information providers

5.2.6 MARKETING GUIDELINES

5.2.6.1 Mandatory Notices

5.2.7 CONSUMER PROTECTION REGULATIONS

5.2.7.1 Right to cancel loans

5.2.7.2 Right to receive clear and complete information from lenders

5.2.7.3 Consumer complaints process

5.2.9 DATA PROTECTION AND CYBERSECURITY

5.2.10 FINANCIAL CRIME

5.3.1.1 Scope of regulation