Experts have raised concerns over poor borrowing habits among Kenyans
The Financial Market Conduct Bill 2018 will hold lenders responsible for enticing borrowers with increased credit limits.
The proposed law wants lenders to consult borrowers before increasing the limit by determining that it won't cause them financial distress.
Doing so could attract a penalty of Sh10 million for first offence and Sh20 million in a subsequent case.
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Currently, mobile phone lending applications including Branch, Tala and M-shwari increase credit limits for borrowers without consent.
Responsible borrowing
Additionally, lenders will be prohibited from having clauses in the loan contract that purport to increase the credit limit under a contract without the consent of the borrower.
Likewise, Treasury wants to establish specific hours within which financial institutions will be allowed to trade loans.
Looking for customers outside this period could lead to a Sh5 million or two years in prison for a first offence. A repeat offence will attract Sh10 million or five years in jail.
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The Bill is expected to cultivate responsible borrowing among Kenyans with experts raising concerns over poor borrowing habits.
A recent report by Financial Sector Deepening Kenya noted that most Kenyans, and more so the youth, are taking advantage of mobile lending to take loans in a bid to satisfy their lifestyles.
