On 17th May, 2022, the Central Bank of Kenya (“CBK”) issued a press release to remind all previously unregulated Digital Credit Providers (DCPs) to apply for licensing. All DCPs that have not yet applied for licensing have until 17th September, 2022 to make their applications to the CBK. The press release provides that no extension will be granted after the application deadline of 17th September, 2022.
The requirement to apply for licensing to the CBK is pursuant to the publication of the Central Bank of Kenya (Digital Credit Providers) Regulations, 2022 (“the Regulations”), which were gazetted on 18th March, 2022. The Regulations provide for the licensing and oversight of DCPs and apply to any person that has established or is carrying out a digital credit business in Kenya or otherwise holding himself out as carrying out a digital credit business in Kenya.
The Regulations do not apply to:
(a) Institutions licensed under the Banking Act;
(b) Institutions licensed under the Microfinance Act, 2006;
(c) A Sacco society licensed under the Sacco Societies Act, 2008;
(d) The Kenya Post Office Savings Bank supervised under the Kenya Post Office Savings Bank Act;
(e) Credit arrangements involving the provision of credit by a person that is merely incidental to the sale of goods or provision of services by the person whose primary business is the provision of the goods or services;
(f) An entity whose digital credit business is regulated under any other written law;
(g) Any other entity approved by the CBK.
DCPs that contravene the Regulations shall be liable upon conviction to imprisonment for a term not exceeding three years or to a fine not exceeding five million shillings (approx. US$ 50,000) or to both.
DCPs shall be required to pay annual renewal fees on or before 31st December every year. DCPs shall also be required to submit a return to the CBK certifying their compliance with the Central Bank of Kenya Act (“the CBK Act”) and the Regulations, on or before 31st December every year.
DCPs shall also be required to notify the CBK of any intended changes in its significant shareholding, board or management structure, or the appointment of a new director, chief executive officer or a senior officer at least thirty days before the effective date of such changes or appointments. A significant shareholder means a person other than the Government or a public entity, who holds directly or indirectly or otherwise has a beneficial interest in ten percent (10%) or more of the share capital of a digital credit provider.
The Regulations also provide that no person shall be a significant shareholder, director, chief executive officer or a senior officer of a digital credit provider unless the CBK has certified the person as fit and proper.
The Regulations also provide for the activities of DCPs which include the provision of credit; and any other activity as may be approved by the CBK from time to time.
DCPs are also prohibited from inviting or collecting deposits in any form, including the taking of cash collateral as security for loans in the course of carrying out digital credit business. DCPs who contravene this shall be liable to assessment of penalties and other administrative sanctions including the revocation of the DCPs’ licence. The press release and regulations can be found here and here
