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Home » Insights » Regulation of Digital Lenders – the Central Bank of Kenya (Amendment) Act, 2021 and publication of Central Bank Digital Credit Providers Regulation

Regulation of Digital Lenders – the Central Bank of Kenya (Amendment) Act, 2021 and publication of Central Bank Digital Credit Providers Regulation

In a move regulate the sector and deal with concerns raised, the Central Bank of Kenya (Amendment) Act, 2021 was passed on 7 December 2021. The Act empowers the Central Bank of Kenya (‘CBK’) to license and oversee digital lenders.

Additionally, the Act requires CBK to publish Regulations within three months, i.e., by March 23, 2022. So far CBK has developed the draft Digital Credit Providers Regulations and invited the public to provide written submissions or representations by 21 January 2022 (now past).  The Regulations provide for inter alia the licensing, governance, and credit operations of Digital Credit Providers (DCPs). They further provide for consumer protection, credit information sharing, and elaborate on the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) obligations of DCPs.

As regards their applicability, the proposed regulations will not apply to banks, microfinance banks, Saccos, Kenya Post Office Savings Bank or any other entity approved by CBK. As such, commercial bank-backed digital loan products such as M-Shwari and KCB M-Pesa will not fall within the ambit of the regulations. In particular, we foresee that the Act and the draft regulations will have the following implications:

  • Mandatory Licensing.
  • Data protection.
  • Reduced consumer exploitation.
  • Reduced Credit Reference Bureau listing.

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