Ghana's Banking Authority Classifies "Digital Lending Platforms" as Non-Bank Financial Institutions

The Bank of Ghana (BoG) has taken a significant step to regulate the digital lending market in Ghana by designating Digital Credit Services as a Non-Bank Financial Service. This move comes as the digital lending market in Ghana has grown rapidly via mobile money rails and fintech apps, with providers operating under varied permissions.

The designation signals the BoG's intent to use regulation to promote financial inclusion while curbing bad actors in the market. The BoG's actions are part of an ongoing effort to create a single reference point for compliance and supervision in Ghana's digital lending market.

With this designation, mobile/app-based lending will now be brought under an explicit regulatory umbrella. The coming Directive will outline licensing requirements for providers of Digital Credit Services, including application steps, capital and governance thresholds, and reporting duties.

Tighter standards on disclosures, interest/fee transparency, data privacy, collections practices, and complaint resolution will be enforced. This is aimed at ensuring that consumers are protected from predatory lending practices that have been a concern in other markets.

The BoG's regulatory measures may also lead to potential coordination with telcos and credit bureaus for responsible lending. The publication of the BoG Directive marks the next step in the regulation of digital lending in Ghana, paving the way for clearer licensing and consumer-protection rules as digital lending expands.

It is important to note that the designation does not grant automatic authorization or licenses to current digital lenders. A transition window for existing providers to align or exit will be provided. The designation applies to entities already operating under Act 774's First Schedule.

The BoG's actions are in response to consumer complaints in other markets regarding digital lending practices. The BoG's Directive on disclosure that sets the requirements for licensing digital credit service providers was issued to address these concerns and promote responsible lending in Ghana's digital lending market.

The BoG's designation of Digital Credit Services as a Non-Bank Financial Service further signals its intent to regulate digital lending in Ghana. This move is expected to promote financial inclusion while curbing bad actors, thus determining the pace at which legitimate digital lenders can scale and predatory models can be pushed out.

The formal category created by this designation will serve as a single reference point for compliance and supervision, ensuring a level playing field for all players in Ghana's digital lending market. This is a significant step towards ensuring the sustainability and responsible growth of digital lending in Ghana.

Ghana's Banking Authority Classifies "Digital Lending Platforms" as Non-Bank Financial Institutions