Central Bank of Kenya to Grant Licenses to Non-Bank Lenders with Loan Portfolios Over KES 15 Million
Central Bank of Kenya Proposes Regulations for Non-Deposit Taking Lenders
The Central Bank of Kenya (CBK) has proposed new regulations, called the Central Bank of Kenya (Non-Deposit Taking Credit Providers) Regulations, 2025. These regulations aim to strengthen oversight of non-deposit-taking lenders (NDTCPs) in Kenya, expanding the regulatory scope beyond digital credit providers to a broader class of lenders.
The proposed regulations will impact various types of lenders operating outside CBK oversight, including buy-now-pay-later firms, hire purchase businesses, credit guarantors, peer-to-peer platforms, and pay-as-you-go operators.
Key features of the proposed regulations include:
- Definition and Scope: The regulations apply to non-deposit-taking credit businesses not regulated under other laws like the Banking Act, Microfinance Act, or Sacco Societies Act. This covers entities lending money to the public or segments of it, outside traditional deposit-taking institutions.
- Registration and Licensing: NDTCPs will be subject to a two-tier system. Initial registration is required for all, but full licensing and heightened CBK oversight—including reporting and monitoring—will be triggered when an NDTCP’s capital, borrowings, or loan book exceeds KES 20 million. This aims to ensure stronger regulation of larger or more systemically significant lenders.
- Differentiation between Retail and Institutional Lending: The draft regulations recognize differing risk profiles by proposing to regulate retail lending more strictly than institutional lending. Institutional lenders with sophisticated borrowers may be exempt from some registration and licensing requirements.
- Consumer Protection and Market Stability: The regulations build on earlier attempts to curb unethical lending practices such as exorbitant interest rates, aggressive debt collection, and data privacy violations. They are part of a wider CBK initiative to create a secure, inclusive, and resilient credit ecosystem beyond traditional banks.
- Regulatory Context: These reforms follow amendments to the Central Bank of Kenya Act by the Business Laws (Amendment) Act, 2024, which replaced the term "digital credit providers" with "non-deposit taking credit providers" to reflect a broader market reality.
The public consultation on these draft regulations is ongoing until September 5, 2025, allowing stakeholders to comment before finalization.
Smaller players will still need to register with the regulator, creating a two-tier system. The existing 126 licensed digital credit providers will not need to reapply their licenses. However, another 574 applications for digital credit provider licenses are still pending and will be assessed under the new regulations.
Lenders must sign and adhere to a code of conduct covering fairness and transparency. Firms seeking a full license will face detailed disclosure requirements, including corporate and ownership records, sources of capital, consumer protection measures, anti-money laundering controls, pricing models, and technology systems. Once the rules are gazetted, players will have six months to comply.
The new regulations do not apply to the 1,700 micro-lenders regulated by the Ministry of Industrialization, Trade, and Enterprise Development. The CBK's mandate expansion is part of Governor Kamau Thugge's push for consistency in a sector where borrowers face varied practices and opaque pricing.
If a firm crosses the KES 20 million threshold, either by raising more capital, borrowing, or growing their loan book, they must convert their registration into a full license. Any credit-only provider with at least KES 20 million in capital, borrowings, or loan book will need to obtain a CBK license.
In summary, the new CBK proposed regulations for non-deposit-taking lenders aim to formalize their registration and licensing, impose greater oversight especially on larger lenders, and provide enhanced consumer protection measures, thereby filling existing regulatory gaps in Kenya’s credit market. This initiative forms part of Kenya’s broader effort to stabilize and inclusively grow its financial ecosystem.
Technology will play a significant role in the compliance process of the new regulations, as lenders will need to implement systems to meet detailed disclosure requirements and adhere to a code of conduct.
The implementation of these regulations in the Kenyan finance industry could potentially open up new business opportunities for technology companies specializing in regulatory compliance and digital transformation solutions.
