The Kenyan credit market is on the brink of its most significant transformation in years, as the Central Bank of Kenya (CBK) prepares comprehensive regulations designed to bring all non-deposit-taking lenders under its direct regulatory oversight for the first time.
Proposed Regulatory Framework
The draft regulations will mandate that any credit-only provider meeting a specified threshold must obtain a full license from the CBK. This threshold applies to firms with at least KES 20 million (approximately $155,000) in capital, borrowings, or total loan book value. A two-tier system is being established to close regulatory gaps that have previously left large segments of the industry largely unregulated. Smaller firms falling below this monetary threshold will still be required to register with the CBK.
Once the new rules are officially gazetted, affected industry players will be given a six-month window to achieve full compliance. This short timeframe signals the regulator’s commitment to rapidly enhancing scrutiny across the entire sector.
Scope and Impact
This move will specifically impact lenders that currently operate outside of traditional CBK supervision. This includes firms involved in buy-now-pay-later services, hire purchase businesses, credit guarantors, peer-to-peer lending platforms, and pay-as-you-go operators. The new regime is designed to establish baseline standards for all credit operations, covering critical areas such as loan pricing, the handling of customer data, and the procedure for resolving complaints. Historically, these areas have relied more on industry self-policing rather than formal, enforceable rules.
Licensing and Compliance Requirements
Firms applying for a full license under the draft framework will face rigorous disclosure requirements. These include submitting detailed documentation on corporate structure, ownership records, sources of capital, and mechanisms for consumer protection. Applicants must also provide comprehensive details on anti-money laundering controls, their loan pricing models, and their technology systems. Crucially, they are required to submit formal policies on managing credit risk, ensuring data security, and handling complaints, along with concrete proof that their funding sources are legitimate and not linked to any criminal activity.
Firms that fall below the KES 20 million threshold will undergo a more streamlined registration process. However, they must still provide essential corporate, policy, and governance documents. Upon reaching the KES 20 million threshold—whether through increased capital raising, additional borrowing, or growth in their loan book—these registered firms must promptly upgrade their status to a full license. The CBK intends to actively monitor for any instance of capital under-reporting and reserves the right to compel a faster license upgrade in cases of observed rapid growth or incomplete disclosures.
Existing Digital Lenders
The existing 126 digital credit providers that have already been licensed will not be required to reapply under the new regulations. However, the applications of the other 574 firms currently awaiting approval will be assessed against the requirements of the newly introduced framework.
Enhancing Consumer Protection
A key objective of the regulations is to standardize consumer protections across the entire spectrum of credit-only providers. Lenders will be required to sign and strictly adhere to a code of conduct emphasizing fairness and transparency in their dealings. This wider mandate, which was granted through amendments to the Business Laws (Amendment) Act 2024, is aligned with Governor Kamau Thugge’s broader strategy to bring consistency to a sector often criticized for varied borrower practices and opaque pricing structures.
