The Central Bank of Kenya (CBK) has proposed new regulations that would impose different fee levels and compliance requirements on non-deposit-taking credit providers, marking a shift in how the apex bank intends to govern the fast-growing digital lending sector.
Under these draft rules, firms with capital below KSh 20 million can operate only under registration, subject to less stringent oversight, while those meeting or exceeding the threshold must seek a full license.Providers seeking a full operating licence would pay a KSh 100,000 application fee and an annual licence fee of KSh 500,000.Firms under the initial capital threshold will seek registration, rather than a licence, and would pay the same application fee but a reduced annual charge of KSh 250,000.
Licensed providers, typically larger digital lenders and microfinance firms, would be subject to the highest compliance costs and the most comprehensive reporting obligations. Registered providers would face lighter fees but still fall under core consumer protection and anti-money laundering rules.
The draft regulations also set detailed standards for loan agreements and interest setting. Before disbursing funds, lenders would need to provide customers with clear, written contracts outlining repayment terms, interest rates, charges, default consequences, and dispute resolution mechanisms. Providers would be required to disclose the full cost of credit, including any late payment penalties or fees, and ensure customers are aware of their rights and obligations.
The proposed regulations will compel lenders to prove the legitimacy of their funding sources, notify the central bank of any new capital injections with supporting shareholder and beneficial ownership details, and verify customer identities using independent documentation. Special provisions target remote, non–face-to-face transactions, requiring lenders to guard against impersonation. All these provisions are intended to strengthen the country’s Anti-Money Laundering bulwark.
Kenya has been grey-listed by both the Financial Action Task Force (FATF) and the The European Union for being a high-risk jurisdiction for money laundering and terrorism financing. This has prompted the government to expedite laws that would arm regulators to prevent a deterioration in the country’s financial security standards.
CBK would also be authorized to inspect lenders and their agents, demand periodic reports on loan performance, customer complaints, borrowings, outsourced services, and require annual certifications of compliance. Lenders would need to make their records and systems readily available for review, with penalties for failure to meet reporting and regulatory standards.
The proposals, still in draft form, underscore Kenya’s push to formalize a sector that has operated with limited regulation. About eight million Kenyans accessed KSh 180 billion in loans from digital credit providers (DCPs) in 2024, thanks to improved smartphone and internet penetration. However, due to lax regulations and the lack of recovery guarantees, the sector has faced a maelstrom of digital harassment and predatory interests.