On 19th June, 2020 the Central Bank of Kenya (Amendment) Act, 2020 (“the Bill”) was published in the Kenya Gazette. The Bill seeks to among others, amend Section 4A of the Central Bank of Kenya Act, Cap 491 Laws of Kenya, to expand the objects of the Central Bank of Kenya (CBK) to regulate and supervise the conduct of:
- providers of digital financial products and services;
- digital credit providers and digital credit service providers;
- providers of financial products and services; and
- financial services.
Currently, there is no legal framework governing digital borrowing platforms since they are exempt from classification as financial institutions under the Banking Act, Cap 488 Laws of Kenya and Microfinance Act, Number 19 of 2006. This has led to among others, unregulated monthly interest rates being charged by digital credit providers, an increase in the rate of fraud and loan defaults amongst borrowers, a disregard of borrowers’ rights to be informed on the consequences of defaulting and a breach of data privacy rights by credit providers during attempts to recover the loans.
The coming into force of this amendment has the possibility to not only curb the incidences of the afore-mentioned practices but also increase the tax base in an effort to help the government implement its various agendas. However, in its attempt to regulate providers of digital financial products and services, CBK should ensure that it does not to create barriers of entry into the digital financial market.
All in all, CBK seeks to ensure that there is a fair and non-discriminatory marketplace for access to credit.
The Kenya Gazette supplement publishing the Bill can be found here
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