Legal and Regulatory Framework for Digital Credit Providers: Lessons from Kenya’s digital credit providers regulations, 2022

The Ghana has seen and is experiencing growth created by unlicensed digital credit providers in the country’s financial sector space over past decade.

Contributory factors to digital credit in Ghana’s banking space included increased mobile penetration and internet connectivity, the COVID-19 pandemic’s push for contactless transactions, supportive regulatory frameworks like the Branchless Banking Guideline, the growth of FinTech innovations and alternative data for credit scoring, and a government push towards a cash-lite economy to enhance financial inclusion and operational efficiency. These digital credit providers employ the use of information and communication technology in making their loan products attractive.

Digital credit had offered a path to reaching unbanked and under-banked populations, providing access to financial services for more people in the urban and community settings. Advances in credit scoring, few regulatory barriers, and the widespread use of mobile phones and mobile money have enabled the growth of the digital lending industry, giving borrowers a quick and convenient option for credit. However, the Ghanaian digital credit providers operate under an unregulated model but have made   positive impact on alleviation of poverty and financial inclusion.

There has been an outcry from the members of the public including Bank of Ghana on the activities of the unlicensed digital credit providers in the country.  The Bank of Ghana intended regulations may seek to address concerns raised by the public given the recent significant growth of digital lending, particularly through mobile phones.

These concerns relate to the predatory practices of the previously unregulated digital credit providers, and in particular, their high cost, unethical debt collection practices, and the abuse of personal information. The intended Bank of Ghana regulations may provide for inter alia the licensing, governance, and lending practices of DCPs in the country. The intended regulation may also provide for consumer protection, credit information sharing, and outline the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) obligations of DCPs.

Ghana could emulate the Central Bank of Kenya’s (Digital Credit Providers) Regulations, 2022. Kenya has been able to put these digital credit providers under the regulation of the Central Bank of Kenya. In its press release dated March 21, 2022, the Central Bank of Kenya (CBK) announced the publication by Legal Notice No. 46 of March 18, 2022, of the Central Bank of Kenya (Digital Credit Providers) Regulations, 2022.

The Regulations were issued in accordance with Sections 57(1), 57(3), and 57(4) of the Central Bank of Kenya Act (the CBK Act). They provide for the licensing and oversight of previously unregulated Digital Credit Providers (DCPs). This article examines the regulations and concludes by recommending that Ghana should emulate Kenya by publishing Bank of Ghana Digital Credit Providers Regulations

1.0 Introduction/ Background  

The Ghana has seen and is experiencing growth created by digital credit providers in the country’s financial sector space over past decade. Contributory factors to digital credit in Ghana’s banking space included increased mobile penetration and internet connectivity, the COVID-19 pandemic‘s push for contactless transactions, supportive regulatory frameworks like the Branchless Banking Guideline, the growth of FinTech innovations and alternative data for credit scoring, and a government push towards a cash-lite economy to enhance financial inclusion and operational efficiency.

The widespread adoption of mobile phones and increasing internet connectivity have laid the digital infrastructure for digital credit services. Digital credit providers have continued to support to the lives of poor and vulnerable innocent people in the rural community setting in Ghana. Technology firms have driven innovation in product design, delivery, and user experience for financial services, moving beyond traditional banking models. Digital credit had offered a path to reaching unbanked and underbanked populations, providing access to financial services for more people.

With the advancement in information technology, there has been an influx of several digital lending companies into countries like Kenya and La Cote D’Ivoire (Adewumi & Jolaosho, 2022). Digital lending is a remote and automated lending process that leverages seamless digital technologies to acquire customers, assess their creditworthiness, process loan approvals, disbursement, recovery, and any related customer service.  The innovative approach has transformed the lending landscape in Ghana.

Bank of Ghana has taken cognizance of digital lending and its associated risks, and the guidelines set in place to govern regulatory compliance for the protection of consumers. Ghanaian digital lending is growing rapidly today due to the advancements in technology and increasing smartphone penetration. Digital lending in Ghana could be an evolutionary shift that has enhanced accessibility and speed for borrowers along with offering efficiency. There are a few significant benefits that customers have with this- a cost-effective service, and it also provides superior customer experience.

Digital credit products refer to loans that are instant (take no more than 72 hours for loan approval and disbursement), automated (using alternative credit data and algorithms to score potential borrowers), and remote (accessible with minimal physical human interaction) (Chen & Mazer, 2016). Digital credit products offer loans to customers who have historically lacked access to the formal financial system, including those lacking proper financial documentation, a formal bank account, or close physical proximity to financial services.

Digital credit products have been lauded by some for creating the opportunity to extend liquid capital to unbanked and other financially excluded groups (AFI, 2015; Cook & McKay, 2015). The Consultative Group to Assist the Poor (CGAP) claims that digital data collected from mobile phone use, social media or mobile money account transactions have the potential to benefit both consumers and providers of digital credit (Chen & Faz, 2015) Digital credit products are provided in a wide variety of ways, including through mobile money, feature phone platforms, online platforms, and hybrid platforms, and also follow multiple product business models, including general purpose loans, retail loans, and person-to-person (P2P) loans (EPAR, 2017).

Ghana has seen and is experiencing the growth created by digital credit providers. Digital credit providers have continued to pose dangers to the lives of poor innocent people. With the advancement in information technology, there has been an influx of several digital lending companies into Ghana. The lending companies employ the use of information and communication technology in making their loan products attractive. The loan recovery methods of these lenders are crude and life-threatening coupled with very high-interest rates.

The Ghanaian digital credit providers operate under an unregulated model and have yet to show positive impacts or alleviation of poverty. This lack of impact is due to abusive interest rates, loan shark methods of debt collection. However, such growth has led to unethical practices, data privacy issues, and lack of oversight. Bank of Ghana is yet issue guidelines on the issue have been focused on addressing such issues.

The rise of online lenders on the back of tough loan conditions imposed by commercial banks has brought relief to thousands of borrowers. However, unconventional loan recovery tactics deployed against defaulting borrowers by unprofessional online lenders have brought untold pains and emotional trauma to many Ghanaians. The Governor Dr Asiamah Bank of Ghana on 29/08/2025 formally designated credit services as a non-bank financial service, bringing the financial sector’s fast expanding segment under the regulatory purview of Bank of Ghana. In the notice issued on 29/08/2025, the central bank.

2.0 Definition of Digital Credit:

The World Bank defines digital credit as unsecured cash loans in emerging markets that are acquired and managed through digital channels, leveraging digital data for automated lending decisions and utilizing digital means for disbursement and collection, effectively reducing the need for in-person interactions and bridging geographical distances. The focus is on digital credit services that leverage customers’ existing access to a mobile phone, though there are also digital credit models. Digital microcredit refers to credit products that are short-term (one week to a few months), low value, accessed via mobile devices, and typically involve automated credit scoring and/or fast approval. Digital microcredit models initially relied on feature phones, but increasingly available on smartphones via app-based lenders. The application and approval process can be instantaneous or near instantaneous, often rely on scoring based on alternative data (World Bank, 2016) Digital microcredit refers to credit products that are short-term (one week to a few months), low value, accessed via mobile devices, and typically involve automated credit scoring and/or fast approval. Digital credit refers to cash loans provided through online platforms and mobile apps, often using digital data to automate lending decisions and remotely disburse and collect funds.

This process bypasses traditional sales interactions and brick-and-mortar branches, allowing for rapid loan approvals and remote access to funds and repayments. Digital credit is expanding quickly, particularly in emerging markets, and relies on digital data analysis and automated processes to assess borrowers and manage loan. Digital credit products refer to loans that are instant (take no more than 72 hours for loan approval and disbursement), automated (using alternative credit data and algorithms to score potential borrowers), and remote (accessible with minimal physical human interaction) (Chen & Mazer, 2016). Digital credit products offer loans to customers who have historically lacked access to the formal financial system, including those lacking proper financial documentation, a formal bank account, or close physical proximity to financial services. Most of the digital credit providers give small loans usually known as

microcredit. The smallness of those small amounts qualifies them as microloans. According to Megan Whittaker (2008) the concept of microcredit, in which poor people are given access to small loans as an alternative to charity, began as an economic and social experiment in the developing world. Micro-lending was pioneered by Bangladeshi Professor Muhammad Yunus in (2002) when he launched an action research project in his native country to ‘examine the possibility of designing a credit delivery system to provide banking services targeted at the rural poor

3.0 Three Core Components of Digital Lending: Use of Digital Channels’; Use of Digitalized Data and Focus of Customer Experience and Engagement.

Digital lenders leverage digital channels such as smartphone apps and USSD (Unstructured Supplementary Service Data) menus to reach new and existing customers where they are – at home, at work, or on-the-go – so they can apply for credit, receive loan disbursements, obtain information on their accounts, and make payments remotely. An effective digital channel allows customers to engage with the product or service wherever and whenever is convenient for them. Such channels also support the collection of digital customer data by the Financial Service Providers (FSPs)

In lieu of face-to-face, time-intensive evaluations, digital lenders depend on digitized data to evaluate clients. A variety of data sources, such as bank statements, bill payment histories, e-commerce transactions, call data records, and credit bureau information, are fed into algorithms and analyzed to predict willingness and capacity to repay. Customer data is also used to build engagement tactics and improve the customer experience –for example, by offering personalized communications or specially-designed product offerings such as targeted promotions based on customer behavior. Over time, once digital processes are in place, the credit decision should be made in less than 24 hours. Digital lending from the customer perspective focuses on how the customer experiences a digital product. Digital lenders use digital channels and data to offer clients convenient access, quicker approval, personalized communication, and responsible products and pricing

4.0. Digital Lending Models

Digital lending is the process of offering loans that are applied for, disbursed, and managed through digital channels, in which lenders use digitized data to inform credit decisions and build intelligent customer engagement. Digital lending in Ghana may encompass new models relating to credit access. Major models include

**Online Lender: Financial Service Providers (FSPs) that provide end-to-end digital lending products via a website or mobile application. Online lenders provide end-to-end digital lending products directly to the customer online or via a mobile app. Customer acquisition, disbursement, and account management processes are usually fully digital, and underwriting is conducted using advanced scoring and alternative data provided by the customer. This model is heavily reliant on the quality of scoring and is specifically designed such that there is no need for face-to-face contact or even for customers to call into a call center.

**P2P Lender: Peer to Peer lending occurs when a lender and borrower transact business without the role of any intermediary. Digital platforms that facilitate the provision of digital credit between many borrowers and lenders, typically playing an ongoing central role in the relationship between these parties. P2P platforms facilitate the provision of digital credit between many borrowers and institutional or individual lenders, and play a central role in managing their relationship. The P2P lender usually designs the product, scores the borrower, and may support the repayment and collection processes. Funding is provided by the lender, with the platform taking an origination fee or a cut of the interest income. Some P2P platforms take the risk of nonpayment and bear the loss; others build a loss reserve fund for the portfolio, from fees taken at loan disbursement.

**e-Commerce and Social Platforms: Digital platforms wherein credit is not their core business, but that leverage their digital distribution, strong brand, and rich customer data to offer credit products to their customer base. While the core business of e-Commerce and Social Platforms is not the provision of credit, they leverage their digital distribution, strong brand, and rich customer data to offer credit products to qualified borrowers from their customer base. While some simply act as an origination platform for a third-party lender, others offer end-to-end solutions, including funding. For these platforms, the pressure for the customer to repay comes from a desire to continue using the platform’s primary services. Poor repayment habits will show up on the customer’s record and lead to exclusion from the platform for purchases or activity.

**Mobile Money Lender: Partnership model wherein lenders work with mobile network operators (MNOs) to offer mobile money loans to their customer base, leveraging mobile phone data for scoring. Mobile Money Lenders partner with mobile network operators (MNOs) to offer credit to their customer base. These lenders acquire customers from the MNO network, use transactional or phone data for scoring, and disburse to a mobile wallet. The digital interface is supplemented by a physical agency network for cash-in and cash-out. Loan sizes often start small, due to limited data points on the customer, but increase dramatically as the customer repays and builds credit history with the lender.

**Marketplace Platforms: Digital platforms that originate and match one borrower with many lenders for an origination fee; the lender and borrower then enter into a bilateral agreement. Marketplace Platforms originate and match one borrower with many, often institutional, lenders. Lenders use the platform as an acquisition channel, whereas borrowers use it to access a wide range of lending products at competitive pricing. Many marketplace platforms offer independent credit and risk assessments that leverage non-traditional data, whereas lenders control product design and provide funding. These platforms take an origination fee; after the disbursement of funds, the customer relationship is directly with the lender

**Supply Chain Lender: Non-cash digital loans for specific asset financing, invoice financing, or pay-as-you-go asset purchase within a supply chain or distribution network. Supply Chain Lenders provide digital loans for specific asset financing, invoice financing, or pay-as-you-go asset purchase within a supply chain or distribution network. These firms typically offer closed-loop lending products, where they partner with players within the supply chain or distribution network to acquire customers, access data, and make loan decisions. Repayment is often enforced through penalties exerted by the distribution network; for example, the wholesaler or distributor may withhold inventory or asset suppliers may turn off utility functionality.

**.Tech-enabled Lender: Traditional FSPs that have digitized parts of the lending process, either in-house or through partnerships. Tech-Enabled Lenders are legacy financial services providers that have embraced technology to digitize parts of the lending process, either in-house or through partnerships. This could include adding digital acquisition channels, digital disbursement and repayment via bank account or mobile wallet, and digital account management. This is supported by a physical distribution network for a blended approach of technology and human touch

5.0. Literature Review on Regulatory Issues Related to Digital Credit Providers

Digital financial services regulations evolved at different rates across Sub-Sahara Africa countries like Kenya, Tanzania and La Cote D’Ivoire. This could partly explain the differences in the uptake and utilization of DFS and financial inclusion.

The rapid development of DFS greatly depends on a robust and flexible regulatory framework and sound financial literacy, as witnessed in Kenya and South Africa (Ochen & Bulime 2021).  DCPs regulations evolved at different rates across Kenya, Uganda and Tanzania. These regulations cover authorization, corporate governance, consumer protection, transaction limits, and know your customer and agent networks, among others. Regulation plays a critical role in the development and spread of digital financial services (DFS). Digital credit logically falls in the intersection of two major regulatory frameworks: (a) the laws and regulations that apply to ‘credit’ and finance more broadly; and (b) the laws and regulations that govern ‘digital’ transactions.

Digital credit and DFS lending regulations are a specific subset of the broader regulatory environment for financial services. The regulatory sphere for digital credit products is still nascent, though multiple groups are examining the regulatory issues specific to the industry (AFI, 2015; Arner et al., 2015; Chan & Faz, 2015; Jentzsch, 2016). We identified ten key regulatory issues in the literature that apply to digital credit (though all also apply to financial products and services more broadly), and we found 20 specific examples of regulator. Under the Digital Credit Providers Regulations all digital credit providers are licensed and the regulatory framework not only addresses the urgent concerns around market conduct and consumer protection but also seeks to enhance financial stability in the face of rapid digital expansion.

Through a review of the recent literature we identified ten regulatory issues within these two broad themes: five issues that are related to provider market conduct (data management and privacy, product disclosure, customer redress, consumer over-indebtedness, and rates and pricing) and five issues related to systemic risk aimed at the financial system as a whole (licensing and reporting requirements, lending prohibition regulations, regulatory sandboxes, capital requirements, and governance requirements) The literature review for this study covered; licensing and reporting requirements; capital requirements; governance requirements; lending prohibitions;  market conduct; data management and privacy; disclosure and transparency; customers’  redress; consumer over-indebtedness; rates and pricing; systemic risk (EPAR; 2017).

1. Licensing and Reporting Requirements

Central banks should establish licensing and reporting requirements for digital assets to ensure regulatory compliance, promote stability and transparency in the financial system, and mitigate risks associated with digital currencies. These regulations help to safeguard against illicit activities, protect consumers, and enable countries to monitor the economic impact of digital assets by requiring platforms and issuers to adhere to standards and disclose relevant transactions.

Authorities should have a clear legal mandate for licensing, regulating and supervising market conduct for the provision of digital credit. Governance requirements are meant to reinforce responsible decision-making and investments in the financial industry, whether digital or non-digital. Clearly defined licensing and reporting requirements are important to increased accountability in DFS (EIU, 2016). Licensing requirements refer to efforts by regulators to monitor market activity through licensing and provider registration procedures. Reporting requirements refer to regulations outlining the information firms must provide to regulatory agencies over time.

These requirements are particularly important for digital credit products as it is often not clear how to classify these products and their providers into existing regulatory frameworks. According to AFI (2015), regulatory arbitrage (taking advantage of gaps in regulation) is a prominent by-product of rapidly evolving markets for digital credit products. The authors suggest that, due to the variety of business models and partnerships between banks, MNOs, and other non-bank financial institutions, some digital credit providers may avoid certain prudential requirements through arbitrage. In some cases, regulatory oversight for DFS and digital credit is unclear due to a lack of well-defined supervisory authority. In addition, we find a general problem of accountability in the digital credit sector due to weak reporting requirements.

1. Capital Requirements

Central banks must typically establish capital requirements for regulated financial entities to ensure they can absorb unexpected losses and maintain financial stability. While specific capital requirements for digital credit service providers (DCPs) are not detailed here, regulatory frameworks often require these entities to have sufficient capital to meet their obligations. For instance, the Bank of Ghana implements capital requirements for banks under Basel II/III frameworks, and the Central Bank of Kenya (CBK) has regulations for DCPs that require them to have adequate financial resources, though specific capital figures are outlined within their licensing procedures.

Minimum capital requirements attempt to control capital adequacy and lender solvency risks. Capital requirements control the ratio of firm equity to debt or the ratio of capital to risk-weighted assets (ITU, 2016). AFI (2015) argues that creating prudential regulations like capital or reserve requirements will support the introduction of digital credit and will help ensure a sustainable digital financial ecosystem. To the extent that digital credit products are unsecured and represent new loans from formerly unbanked populations (rather than a substitute product for existing loans), this represents additional risk in the financial system. We identified five examples of minimum capital requirements aimed at controlling systemic risk for online or mobile lending products.

These regulations set minimum capital at two points: first at the start of business operations (India, Indonesia, Pakistan, Zambia), and then for the continuing business operations ( India, and Zambia). Regulations that set minimum capital requirements may vary by business model. The regulation from Indonesia and the proposed regulation from India address P2P lending platforms and the Pakistan, Ghanaian, and Zambian regulations focus on issuers of electronic money or branchless banking institutions. To the extent that these institutions are adding new loans to the system, capital requirements will help mitigate the increased risk exposure.

• Governance Requirements

Central banks ensure governance in digital credit providers by setting regulatory frameworks for their operations, licensing and supervision, and enforcing compliance with standards like board composition, board committees, board size, internal controls, data protection, and conflict of interest management. This involves adapting supervisory tools, adopting principle-based regulation, and collaborating with other authorities to create a level playing field that protects users while fostering financial inclusion and stability.

Governance requirements are also related to the broader stability of the financial system (ITU, 2016). In this review, we consider governance requirements as the regulating authority’s requirement that firms submit documentation of their organizational structures, specifically indicating who manages the investments (including years of experience and citizenship) and other factors related to the lending business.

For example, board members with prior financial experience might promote financial stability in the system as a whole (Gibson, Lupo-Pasini, & Buckley, 2015). Arner et al. (2015) argue that good corporate governance is a key attribute necessary to build a robust financial system infrastructure. In a recent survey of 201 financial services executives regarding ethics and compliance standards, the Economist Intelligence Unit (EIU), found that 52 percent of respondents reported that having acceptable governance structures was a major concern for digital finance regulation (EIU, 2016). Governance requirements potentially relate to digital credit because of how undefined the digital credit market is as a whole and especially within current regulatory frameworks, and because of the variety of digital credit business models and partnerships.

While governance regulations are seen as prudent in the broader DFS environment (EIU, 2016), we found only two instances of governance requirements in digital credit-related regulations (India, Indonesia), one of which is a proposed regulation not yet enacted. Both regulations mention that at least a portion of the loan provider’s board of directors must have experience in the financial industry, but they may be allowed to be foreign citizens (Bank of Indonesia, 2016; RBI, 2016).

1. Market Conduct

Central banks must play a crucial role in overseeing digital credit service providers by implementing comprehensive market conduct regulations that ensure transparency, fairness, and consumer protection. This includes establishing guidelines for disclosure of interest rates and fees, mandating complaint resolution mechanisms, and using technology to strengthen oversight. A principles-based, risk-proportionate regulatory approach is essential to foster an open ecosystem while mitigating risks in the rapidly evolving digital financial landscape.

Market conduct regulations include those that direct the competitive conduct of providers in the market and protect the consumer from unfair practices (ITU, 2016). We identified five particular market conduct issues that may relate to digital credit: data management and privacy, product disclosure, customer redress, consumer over-indebtedness, and rates and pricing. While other international and national market conduct regulations and guidelines may exist and potentially affect digital credit, we only include regulations that both 1) were recently created or planned and 2) specifically mention both online/internet/mobile/digital products and lending/loan/credit services.

1. Systemic Risk

Central banks must prevent systemic risk in digital credit by creating technology-neutral, principles-based regulations, enhancing supervisory capacity, and fostering innovation through tools like regulatory sandboxes. Key areas for action include ensuring data privacy and protection, setting clear disclosure rules, establishing robust credit reporting standards, managing risks from alternative data, and ensuring sufficient operational resilience and cybersecurity to safeguard consumers and the financial system. According to USAID (2010) systemic risk in a financial system is defined as “risk that could cause collapse of, or significant damage to, the financial system or a risk which results in adverse public perception, possibly leading to lack of confidence and worst- case scenario, a ‘run’ on the system” (USAID, 2010).

We identified five broad approaches to regulating providers to reduce systemic risk: establishing licensing and reporting standards (to address the lack of accountability), prohibiting certain types of internet or mobile lending, establishing regulatory sandboxes (to balance the need to contain systemic risk with the interest in allowing room for innovation to take place), establishing capital requirements (to address liquidity), and establishing governance requirements (addresses organizational governance standards and financial risks). While other international and national systemic risk regulations and guidelines may exist and potentially apply to digital credit, we only include regulations that both 1) were recently created or planned and 2) specifically mention both online/internet/mobile/digital products and lending/loan/credit service.

vi…Rates and Pricing

Central banks must ensure fair rates and pricing for digital credit providers by setting regulations on transparency, capping fees, requiring the disclosure of total credit costs, and establishing complaint handling procedures. They also oversee licensing, supervision, and conduct audits to monitor compliance and ensure fair market practices to protect consumers and maintain financial stability. Digital credit products are characterized by higher interest rates than some other credit options (Chen & Mazer, 2016), and controlling excessively high rates is a concern for regulators (AFI, 2015). While high rates may be due to a variety of factors such as the costs of providing small loans or the risk of lending to previously unbanked populations (Hwang & Tellez, 2016), regulations aim to target pricing, fees, or interest rates that may be so high as to harm consumers (ITU, 2016). An earlier EPAR review of Digital Financial Services (DFS) consumer protection regulations in 22 countries, found nine with regulations aiming to prevent anti- competitive pricing in DFS (EPAR, 2016).

Most of these pricing regulations are vague (Brazil, Colombia, Indonesia, Nigeria, Sierra Leone, Tanzania, and Uganda), but two (Bangladesh, Egypt) lay out clearer rules for acceptable charges. Additionally, one regulation (from India) specifically caps fees on mobile money transactions. However, none of the regulations identified in this EPAR (2016) report are specific to digital credit or lending.  Within the more specific context of digital credit, regulations that limit loan rates and fees seek to prevent over-indebtedness and reduce debt stress on the part of consumers (AFI, 2015). We identified one country with current regulations interpreted by some sources as restricting rates in digital credit markets

viii…Consumer Over-indebtedness

Central banks must prevent consumer over-indebtedness in digital credit by requiring lenders to conduct affordability assessments, ensuring transparency in pricing and product terms, implementing disclosure requirements, and enhancing consumer empowerment and data protection. Regulatory frameworks and direct oversight of digital lenders are key tools for central banks to mandate responsible lending practices, mitigate risks like unsolicited credit invitations, and protect consumers from predatory practices. The potential for consumers to encounter repayment difficulties is common to all credit sources.

But relatively low barriers to entry and rapid expansion rates may make it particularly difficult to keep track of borrowing through digital credit (Mazer, 2016). As a result, consumer borrowing across multiple digital credit products and debt recycling is a concern (Minnaar, 2011; Buckley & Malady, 2014; AFI, 2015). As regulators and financial inclusion advocates have recognized challenges unique to digital lending, steps are being taken to minimize over-indebtedness for digital borrowers (AFI, 2015). In Kenya, digital credit borrowers with outstanding delinquent loans have been blacklisted by credit regulators (van de Walle, 2016). Recognizing the additional challenges posed by digital credit, some regulators argue it is prudent to continuously monitor not only levels of consumer debt, but also to review the digital credit portfolios of lenders (AFI, 2015).

In another approach, Indonesia and China have set maximum limits on the amount that an individual or business can borrow on P2P lending platforms. In China, this regulation applies to the several thousand P2P companies already in existence, some of whom have been facing financial difficulties (Bo, 2016). In Indonesia, over-indebtedness restrictions are combined with rules attempting to address more systemic market risks (Bank of Indonesia, 2016).

Addressing consumer-indebtedness is meant as a benefit to the consumer (AFI, 2015; Buckley & Malady, 2014). Regulations addressing over-indebtedness, however, can also be seen as restrictive (Meagher, 2005; Tuffin,2009). Lending limits and restrictions can help protect consumer welfare, but may also stifle some productive activities or exclude riskier borrowers, as critics argued in response to indebtedness limits in South Africa’s Consumer Credit Bill (Meagher, 2005).

ix…Customer Complaints/ Redress

Central banks like the Bank of Ghana ensure customer complaints and redress mechanisms for digital credit service providers by issuing guidelines, establishing oversight bodies, and requiring providers to implement fair complaint processes. Authorities should ensure there are appropriate, accessible and efficient consumer complaint and redress systems in place for digital credit services.

These measures include mandating user-friendly procedures, ensuring complaint traceability with unique registration numbers, and providing a multi-level dispute resolution process that often extends to the central bank itself and potentially to courts. Customer redress—providing avenues for customers to lodge complaints and hold providers accountable—is another common regulatory issue across all financial products. Customer redress mechanisms are important for providers to support consumers in using and understanding their products, thereby building trust (ITU, 2016; Malady, 2016).

Although such mechanisms have been well established for consumers of traditional financial services, the demographics of DFS users are typically different (e.g., lower education levels, low-income levels, less experience with financial products and technology), and having effective recourse channels tailored to these consumer are critical for protecting DFS consumers and establishing trust for such products (AFI, 2015; ITU, 2016; McKee, Kaftenberger, & Zimmerman, 2015). A 2016 CGAP brief finds that having a poor or non-existent recourse mechanism was one of the five most common and consequential consumer risks faced by users of DFS impeding adoption; the other four consumer risks are network downtime and service unreliability, insufficient ATM liquidity, complex user interfaces, and fraud targeted towards recipients (Baur & Zimmerman, 2016).

More specific to digital credit products, AFI (2015) notes the need for information regarding consumer recourse options to be accessible via all channels through which digital credit operates (i.e., internet, mobile app, and feature phone). Additionally, AFI advocates for clear directions for consumers about which institution to contact for redress when digital credit products are released by a partnership between banks and other non-bank institutions (for example, M-Shwari in Kenya—a partnership between Commercial Bank of Africa and Safaricom, a mobile network operator (MNO)). Ten of 22 countries included in EPAR’s review of DFS consumer protection had regulations mandating mechanisms for consumers to report complaints (EPAR, 2016).

x…Disclosure and transparency regulation.

Central banks must implement disclosure and transparency regulations for digital credit providers to protect consumers by requiring clear, accurate, and understandable information about loan terms, fees, and data privacy practices, enabling informed decision-making and fair treatment throughout the entire customer relationship. This includes mandates for clear contracts, consent for data use, information on data security, and mechanisms for consumers to understand and withdraw from data sharing where applicable. Disclosure and transparency regulations aim to improve consumers’ knowledge of digital credit products in order to make smart, informed financial decisions, and can empower customers to compare services and choose the most favorable product (AFI, 2015; Blechman, 2016). AFI (2015) lists product disclosure as a main consumer protection issue requiring better regulation, arguing that digital credit providers insufficiently disclose key details of loan products. An example is providers who only disclose product terms and details online, even when the majority of their customers use the product on a feature phone platform. Similarly, advertising for digital credit products can mislead customers; for example, some products use advertising billboards to state the minimum interest rate without providing the whole range (ITU, 2016).

Some argue that product disclosure is particularly relevant for digital credit since these products tend to be more sophisticated and complex than payment and transfer mobile money services (Mazer & Rowan, 2016). Product disclosure and transparency regulations target credit providers’ sharing of product terms, conditions, obligations, fees, procedures, and/or mechanisms with customers (AFI, 2015). Concerns related to product disclosure apply to all forms of credit as well as other financial products. EPAR’s 2016 review of DFS consumer protection regulations identified 17 countries with regulations that require DFS providers to disclose charges to customers in writing, verbally, or both. Disclosure and transparency regulations fulfill the goal of consumer protection by helping customers understand their rights and obligations with DFS (Malady, 2016). Adequate disclosure of fees and terms can also foster competition on fees, interest rates and other product margins if consumers can easily compare services (ITU, 2016)

xi… Data Management and Privacy

Central banks must ensure data management and privacy in digital credit services by establishing clear regulations, licensing frameworks, and supervisory guidelines that mandate security measures, data protection, and consumer consent for information sharing. These efforts involve requiring providers to implement systems for confidentiality, integrity, and accuracy of data, as well as ensuring employees receive data security training.

Bank of Ghana must also promote transparency and build trust by bringing these services under formal regulatory oversight, mitigating risks associated with unregulated operators and fostering financial inclusion. Data Privacy is becoming a bigger worry with the rise of digital lending. Borrowers trust their personal information to online lenders, and data protection is a crucial step in the loan process. Data protection in digital lending is critical against identity theft and fraud; maintains consumer trust and confidence, to ensure regulatory compliance; mitigates financial risks; enhances operational efficiency and ensures ethical data usage.

The use of alternative data, or non-traditional data sources like phone, mobile money, and social media, is a key component of digital credit. According to Jentzsch (2016), DFS and Big Data applications provided an estimated 700 million adults with access to financial services between 2011 and 2014, and alternative data could potentially extend credit to between 625 million and 1 billion additional people. The author adds that access to data will become an increasingly critical issue as more products that rely on alternative data for their credit-scoring algorithms enter or grow in the market. Some view the lack of publicly available data as a barrier to financial inclusion and market development in some countries (Chan & Faz, 2015).

In Africa, Mobile Network Operators (MNOs) own some of the largest data pools because of customers using a variety of their services (e.g., phone, internet, payments, and loan). MNOs without incentives to publicly share these data can be expected to keep them private to leverage future services, but this can prevent alternative products from entering the market and accessing consumer alternative data points (AfricaInvest, 2016; ITU, 2016). This lack of publicly-available alternative data is exacerbated by the low use of social media—Facebook for example had a penetration rate of only 12% across all of Africa in 2015 (AfricaInvest, 2016). credit-scoring algorithms enter or grow in the market. Some view the lack of publicly available data as a barrier to financial inclusion and market development in some countries (Chan & Faz, 2015).

The broad sharing of consumer information, including the financial data generated by digital credit, may pose potential risks to consumer privacy and personal information security (AFI, 2015; Jentzsch, 2016). In addition, some digital credit product algorithms may systematically exclude certain groups, creating equity concerns (Jentzsch, 2016). As such, data privacy is a key consumer protection issue for digital credit regulation (AFI, 2015; Chen & Faz, 2015; PwC, 2016).

Defining what “consumer privacy” entails is also an important element of regulation. For example, some companies like Kopa Leo in Kenya or Rupaiya Exchange in India use “public shaming” via social media for borrowers who do not pay on time (Medine, 2015; Ombija & Chege, 2016),making it unclear which consumer data should remain private and which data can be used to serve unique product need. Data protection is the foundation for safeguarding sensitive information and maintaining the trust and confidence of borrowers. It is impossible to exaggerate the need for robust data protection protocols in the quickly growing digital lending sector.

Protecting personal and financial data is fundamental to maintaining consumer confidence, compliance with regulatory requirements, and preventing cyberattacks. Prioritizing data privacy helps lenders retain a good reputation in the industry and establish enduring bonds with their clients. Digital lending platforms must prioritize data protection as a core component of your business strategy. Make investments in state-of-the-art security systems, follow strict regulatory guidelines, and cultivate an environment of openness and confidence. The future of digital lending depends on your commitment to data protection and privacy

xii. Consumer Protection

Central banks must ensure consumer protection in the digital credit space by establishing clear regulations, mandating transparency in loan terms and costs, and protecting customer data, to mitigate risks like over-indebtedness and aggressive debt collection. Central banks need to develop technology-neutral, risk-based frameworks and possess sufficient capacity to supervise digital lending platforms, building consumer trust and fostering a sustainable, inclusive digital financial sector. Consumer protection frameworks for DFS are critical in building that trust and confidence (Malady 2016).

As with financial services generally and especially in the context of reaching the unbanked, the sound development of DFS lending hinges, to a large extent, on appropriate protection of consumers. Because consumer risks are heightened in this context well-designed protections are needed. Three critical components of this have already been mentioned: the safe- guarding of client funds, the regulation and oversight of agents, and security of e-signatures and e-commerce channels. There remain three further important elements: (i) fair and transparent dealing, (ii) channels for consumer complaints, and (iii) treatment of client data. In the Sub-Sahara Africa region, consumer protection is treated generally as a matter of national jurisdiction, while financial services and the rules protecting clients in that context are defined at the regional level

xiii. Competition and Coordination

Central banks must foster competition and coordination among digital credit providers by establishing technology-neutral regulations, promoting interoperability between payment systems, and developing robust consumer protection frameworks to ensure a level playing field and prevent monopolistic behavior. This involves creating clear rules for disclosure, interest rates, and data protection, while also building supervisory capacity and adopting a principles-based, risk-proportionate approach to governance. Authorities should ensure fair market competition and enhance collaboration to make the provision of digital credit more efficient.

The potential of digital credit service providers to increase volume, efficiency, and inclusiveness in the financial system depends on connectivity among relevant communication channels and accounts. Two important constraints in Ghana, as in other settings, are uneven access to mobile communication channels and limited interoperability between competing digital credit service providers and their networks. These issues are being addressed in part by market players under the guidance of the regulators. More comprehensive solutions will require coordination between financial, telecom, and competition regulators at national and regional levels. This is especially true where, as in Ghana, the DFS lending market is made up of diverse providers who fit into several regulatory niches with differing requirements—a trend worthy of encouragement but also of coordinated oversight

xiv. Conclusion

Digital credit and DFS lending regulations are a specific subset of the broader regulatory environment for financial services. The regulatory sphere for digital credit products is still nascent, though multiple groups are examining the regulatory issues specific to the industry (AFI, 2015; Arner et al., 2015; Chan & Faz, 2015; Jentzsch, 2016). They identified ten key regulatory issues in the literature that apply to digital credit (though all also apply to financial products and services more broadly), and we found 20 specific examples of regulatory. documents from Africa and Asia targeting different aspects of the online and mobile credit and lending industries addressing one or more of these issues.

Existing regulations that do not specifically mention online/digital credit/lending may also be applied to address these digital credit regulatory issues, so a low number of regulatory documents does not mean a particular issue is not covered in country regulations—only that few new regulatory documents have emerged to address these potential challenges. DFS and digital credit products are believed to require an overlapping regulatory framework (for example, coordinated regulations for both the telecommunications and financial sectors or different types of financial institutions) to properly address all consumer and market protection concerns (AFI, 2015; Arner et al., 2015; Malady, 2016). Many countries have high-level regulations, acts, or guidelines focusing on consumer protection, competition, mobile money or electronic transactions, agent or branchless banking, customer service or dispute resolution, or payment systems and banking.

6.0 Overview of Digital Lending in Ghana’s Financial Sector

The concept of lending is not strange or new to the financial sector of any nation, including Ghana. Lending entails the act of giving money to someone with the understanding that they will repay or return same, at a future date agreed by them. The lenders are permitted by law or regulations to charge a fee otherwise known as interest. Digital lending in Ghana is experiencing rapid expansion, evidenced by a surge in credit inquiries driven by mobile-based microcredit and app-based services.  Digital lending expands access to credit for underserved populations in rural and community settings in Ghana by allowing them to apply for loans anytime and anywhere.

This inclusivity is crucial in promoting financial inclusion, enabling more individuals and small businesses to secure necessary funding. The Bank of Ghana (BoG) is responding with the imminent issuance of comprehensive guidelines (expected August 2025) to address public concerns about predatory practices by some online platforms. Key drivers for this growth include improved internet and mobile phone penetration, which are facilitating digital financial inclusion and supporting financial sector digitalization, though regulatory efforts are now focusing on balancing innovation with consumer protection, data privacy, and ethical practices.

Digital lending has become a significant driver in the credit market, with mobile-based and app-based products accounting for nearly half of all credit inquiries in 2024, a significant increase from 2023. The growth is powered by technological advancements like increased mobile phone usage, improved internet connectivity, and the use of AI and big data for credit assessment and fraud detection by fintech companies. Digital lending is a vital tool for expanding financial inclusion, especially in rural areas, as it provides access to formal financial services for marginalized populations through mobile money platforms.

The growth and development of commercial activities in Ghana’s financial sector has equally encourage lending, as no financial sector is complete without lending activities, as people, families, and businessmen resort to digital lending to meet short falls in cash supply needed to finance immediate or emergency needs. A lender could also be licensed financial institutions, registered, and licensed in accordance with law3 and subject to regulatory supervisions, and they could be referred to as traditional lenders. A lender could also be individuals, family members otherwise known as alternate lender. Digital lending is quite different from the conventional lending activities carried out in Ghana’s financial sector.

The conventional or traditional lending takes place within Ghana’s financial institutions, which is heavily regulated by law as stated earlier. Under the conventional or traditional lending model, the customer approaches a financial institution of his choice, applies for loan, which would be granted if the customer meets the criteria laid down for such loan, consideration for loan approval is made by a review of the customers’ financial standing to know if he or she is credit worthy or a credit bureau is called in, to conduct a credit check on the customer, as the credit bureau is mandated to issue a credit report8 on such customer, stating clearly whether he is qualified or not, and in the event of a default in repayment, such a customer may likely be blacklisted from accessing loans from the financial sector or an action for loan recovery is instituted against such customer, in accordance with the provisions of the law.

In the conventional lending, the customer is always known to the financial institution, as physical contact is made and background checks are conducted, third parties are only part of the transactions only if they expressly undertake to act as guarantor (s) or consent to act as guarantor for the borrower or a thing of value otherwise known as collateral will be deposited by the customer, as security for the loan.

In digital lending, loans are applied and processed via digital or mobile channels, such as loan apps installed on mobile phones, supported by a telecom network. Loan decisions are made without necessarily having contact with loan applicant (customer), all the customer does is to supply his on her details to the lender through his phone or grants access to the lender’s loan app to have access to his personal data in his phone, while these are commendable, as loan processes (ranging from application to disbursement) are faster, and convenient, reduces turnaround time, it also raises the issues of privacy rights violations and personal data misuse, as the extent of details which the lender may collate from a customer, may not be within the control of the loan applicant (customer). Thus instances abound, wherein digital lenders in Ghana’s financial sector, in a bid to recover loan from defaulters.

The Ghanaian financial sector is undergoing a transformation, with fintech companies innovating through digital payments, micro-lending, and the integration of financial services into ‘super apps. According to the Bank of Ghana’s (BoG) Credit Reporting Activity Report 2024, a total of 29.5 million credit searches were conducted by financial institutions and authorised users during the year; representing a 114.6 percent increase over the 13.7 million searches recorded in 2023. This expansion was primarily driven by the growth in digital loans, which now account for nearly half of all searches. Of the total enquiries number, 44.4 percent (13.1 million) were linked to mobile-based or digital lending products; reflecting the rising use of mobile money platforms and app-based microcredit services across the country. The report notes that the average number of credit searches per month stood at 2.46 million compared to 2.11 million in the previous year. Financial institutions, particularly deposit money banks (DMBs), dominated usage – accounting for 85 percent of all enquiries – followed by microfinance and microcredit institutions, which together made up 8.8 percent.

The sharp rise in credit enquiry activity highlights a broader transformation in the country’s credit market, driven by rapid digitalization and increased emphasis on data-driven lending. The increase in credit flows was mainly due to expansion of credit to the private sector,” the report noted, adding that this growth was “underpinned by a pickup in real sector activities” and improved transparency through credit referencing systems. This rise in enquiries also corresponds with a 190.3 percent increase in the average number of monthly loan records submitted to credit bureaus, which reached 61.1 million in 2024.

The report attributes this growth to improved digital loan data reporting, which now represents the bulk of individual borrower information in the licensed credit bureaus’ database. The Ghanaian digital credit providers operate under an unregulated model and have yet to show marked positive impact on alleviation of poverty and financial inclusion. This lack of impact is due to abusive interest rates, loan shark methods of debt collection. There has been an outcry from the members of the public including Bank of Ghana on the activities of some the digital credit providers in the country.  Well- designed regulatory framework for digital lending could bridge the credit gap especially for segments that do not typically qualify credit.

7.0 Challenges in the Ghana’s Digital Credit Service Providers in the Financial Sector

The Ghanaian digital credit providers had operated under an unregulated model even though it had made some positive impact on poverty allevation and financial inclusion in the country. However, others associate digital credit with a proliferation of mis-conduct, consumer abuses, and over-indebtedness, which can have severe consequences for the most vulnerable consumers and amplify inequality. There has been an outcry from Read Full Story