Central Bank of Kenya to Grant Licenses to Non-Banking Institutions with Loan Portfolios Over USD 155,000
Central Bank of Kenya Proposes New Regulations for Non-Deposit-Taking Lenders
The Central Bank of Kenya (CBK) has announced plans to introduce new regulations that will extend its oversight to a wide range of non-deposit-taking lenders, including buy-now-pay-later firms, hire purchase businesses, credit guarantors, peer-to-peer platforms, and pay-as-you-go operators.
The proposed regulations aim to close regulatory gaps in Kenya’s fast-evolving credit market by directly supervising all significant non-deposit-taking credit providers and ensuring minimum operational and disclosure standards.
Key points of the proposed regulations include:
- Licensing requirement: Any credit-only lender with at least KES 20 million in capital, borrowings, or loan book must obtain a CBK license.
- Registration for smaller players: Lenders below this threshold will still be required to register with CBK, creating a two-tier supervision system.
- Compliance timeline: Once the rules are officially gazetted, affected firms will have six months to comply.
- Disclosure and operational requirements: Licensed firms must disclose detailed information on ownership, funding sources, pricing models, credit risk policies, data security, consumer protection, anti-money laundering controls, and complaint handling.
- Consumer protection and market standardization: The regulations aim to standardize lending practices, improve consumer protection, and address previously unregulated areas of the credit market which had relied on self-regulation.
- Exclusions: Existing licensed banks, microfinance institutions, Saccos, Kenya Post Office Savings Bank, and entities already regulated under other laws are exempt.
Existing licensed digital lenders will not need to reapply, but pending license applications will be reviewed under these new rules. Smaller registered firms, below the KES 20 million ($155,000) threshold, will undergo a lighter process but must provide key corporate, policy, and governance documents.
The new regulations also cover areas that have, until now, relied more on self-policing. CBK will monitor for under-reporting of capital and can compel a fast upgrade if it sees rapid growth or incomplete disclosures. 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.
They must also submit policies on credit risk, data security, and complaint handling, alongside proof that their funds are legitimate and not linked to criminal activity. Any credit-only provider with at least KES 20 million in capital, borrowings, or loan book will need to obtain a CBK license.
The new regulations are based on amendments to the Business Laws (Amendment) Act 2024. Lenders must sign and follow a code of conduct covering fairness and transparency. The existing 126 licensed digital credit providers will not need to reapply for their licenses.
The new rules, once gazetted, will give players six months to comply. The new regime will set formal rules for areas that have, until now, relied more on self-policing. The Central Bank of Kenya (CBK) is preparing new regulations that will bring every non-deposit-taking lender under its direct control for the first time.
This move is part of Governor Kamau Thugge’s push for consistency in the sector, where borrowers face varied practices and opaque pricing. The regulations aim to standardize consumer protections across all credit-only providers and ensure that all lenders operate under the same rules.
In conclusion, the new regulations by the Central Bank of Kenya will bring significant changes to the non-deposit-taking lending sector in Kenya, aiming to close regulatory gaps, standardize lending practices, and improve consumer protection.
- The proposal by the Central Bank of Kenya (CBK) includes regulations that will extend supervision to technology-driven non-deposit-taking credit providers, such as peer-to-peer platforms and pay-as-you-go operators.
- In the fast-evolving Kenyan finance business, technology-driven lenders will need to adhere to the new regulations, which will ensure minimum operational and disclosure standards, addressing previously unregulated areas relying on self-regulation.
