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30 Apr 2021
BY Mahesh Acharya AND Pooja Rehal

Digital lenders to be placed under the supervision and regulation by the Central Bank of Kenya

The Central Bank of Kenya (Amendment) Bill, 2021, published on 16 April 2021, has a principle objective of amending the Central Bank of Kenya Act to allow the Central Bank of Kenya (“CBK”) to regulate digital credit service providers and ensure that there is a fair and non-discriminatory marketplace for access to credit. The Bill defines a “digital credit provider” as a person licensed by the CBK to carry on digital credit business.

With no current legal framework governing digital borrowing platforms in Kenya, digital credit providers have so far been operating with no restrictions. This has led to a high level of public interest and concern relating to several factors such as exploitation of borrowers. A number of allegations have been made against digital lenders including charging of exorbitant interest rates.

The proposed amendments under the Bill give the CBK the authority to:

  • determine minimum liquidity and capital adequacy requirements for digital credit providers;
  • approve digital channels and business models through which digital credit business may be conducted;
  • supervise digital credit providers;
  • suspend or revoke a licence; and
  • direct or require such changes as they may consider necessary.

In addition, the Bill requires that, for a person to conduct any digital credit business in Kenya, they must be licenced by the CBK. The penalty for non-compliance of this provision, on conviction, is imprisonment for a term of three years, a fine of Ksh5-million, or both. The Bill also provides that persons who were in the business of providing digital credit/loan facilities before the enactment of the proposed Bill must, within six months from the date of such enactment, register with the CBK.

The Bill must go through the legislative process in Kenya which involves a first reading, second reading and third reading of bills in parliament followed by presidential assent and enactment.

Should the Bill be enacted in its current form, digital lenders will placed under the supervision and regulation of the CBK. It is proposed that CBK will, within three months of enactment, publish comprehensive regulations outlining the requirements that digital lenders must meet as well as the extent to which they will be regulated.

While the Bill seeks to regulate digital lenders and to protect low income households and small businesses from what has become a significant source of debt, the detail on the level of regulation will only be understood once the proposed regulations are published. We would also expect that the CBK will put in place regulatory sandboxes before implementation of the regulations to ensure that innovation in the sector is not stifled.

Mahesh Acharya

ENSafrica | Kenya | Partner

+254 721 454 173


Pooja Rehal

ENSafrica | Kenya | Associate

+254 728 610 789