Digital Lending and Supply Now Regulated in Kenya – Financial Services


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On March 18, 2022, the Central Bank of Kenya (“CBK“) has issued regulations giving itself the power to regulate and oversee digital lenders. This is against the background that digital lenders/providers operate in an unregulated manner in the Kenyan market.

The Digital Credit Providers Regulations 2022 operationalize the provisions of the Central Bank of Kenya (Amendment) Act 2021, which received assent on 7th December 2021 and came into force on 23rd December 2021. The Act required that the regulation is adopted within three months after the entry into force of the law and therefore became operational immediately.

Licensing of Digital Credit Providers

Under the Regulations, a person can only engage in digital credit activity if they are:

  • licensed by the CBK; or

  • authorized to do so under any other written law.

Therefore, all unregulated digital credit providers (“DCPs“) are required to apply to the CBK for a license in six months of the publication of these regulations, i.e. September 17, 2022. Failure to meet this date means that a DCP will be required to cease operations in Kenya.

Some of the key terms and definitions relating to digital credit providers are:

  • Digital channels – include the Internet, mobile applications, computer devices or any system that may be prescribed by the CBK.

  • Digital Credit – any credit facility or agreement where money is lent or borrowed through a digital channel.

  • Digital credit business – includes any business providing credit facilities or lending services through digital channels.

  • PCD – means any person authorized by the CBK to carry out digital credit activities.

The Regulations provide that a license must be granted within 60 days of the submission of a complete application. The documentation requirements are defined in the Regulations and are accessible on the CBK website. Once a license is granted, it may not be transferred, assigned or encumbered in any way.

Exempt institutions and entities

Under the Regulations, the following institutions and entities are exempt from registration:

  • an institution licensed under the Banking Act;

  • an institution licensed under the Microfinance Act 2006;

  • a Sacco Society licensed under the Sacco Societies Act;

  • the Kenya Post Office Savings Bank;

  • credit agreements involving the provision of credit by a person that is merely incidental to the sale of goods or the provision of services by the person whose principal business is the provision of the goods or services;

  • an entity whose digital credit activity is regulated by any other written law; or

  • any other entity approved by the bank.

Regulatory Compliance

Compliance requirements under the Regulations include:

  • compliance with traditional fitness and propriety tests applicable to shareholders, directors, CEOs and key senior executives;

  • disclosure of information to credit reference bureaus for the purposes of performing the functions of digital lenders and licensed credit reference bureaus;

  • ensuring the existence of adequate consumer protection provisions;

  • the adoption of elaborate anti-money laundering measures;

  • adoption of measures to counter financial terrorism;

  • compliance with financial and other reporting requirements; and

  • compliance with data protection rules.

Penalty for operating without a permit

The Regulations outline the various offences, penalties and other measures necessary to regulate digital lending and ensure compliance.

In particular, engaging in unlicensed digital credit activities is an offense under the Act and Regulations. Under the law, a person operating without a license is liable to a term of imprisonment not exceeding three years or a fine not exceeding KES 5 million (approximately USD 43,698 at the time of writing) or both.

We recommend that all businesses, corporations and/or entities engaged in digital credit activities take steps to comply with the Regulations. Contact us for help and advice on ensuring compliance with the Regulations.

Review by Mahesh Acharya, executive at ENSafrica in Kenya.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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