CBK Proposes Tiered Licensing Rules to Rein in Digital Lending Sector

Nairobi, Kenya – The Central Bank of Kenya (CBK) has unveiled draft regulations to strengthen oversight over the growing digital lending space. The proposed framework introduces a two-tier regime based on initial capital, with stricter licensing for larger players and lighter registration for smaller outfits.

Tiered Capital-Based Oversight

• Firms with capital under KSh 20 million: Required to register under a lighter-touch regime, paying a KSh 100,000 application fee and an annual fee of KSh 250,000.

• Firms with KSh 20 million or more in capital (including borrowings or loan book): Must obtain a full CBK license, with a KSh 100,000 application fee and KSh 500,000 annual license fee. The licensing category will come with extensive compliance mandates.

Strengthened Compliance and Consumer Protection Measures

Licensed digital lenders will face increased oversight, including:

• Strict anti–money laundering (AML) and counter–terrorism financing checks.

• Transparency in loan terms: clear contracts specifying interest rates, penalties, repayment schedules, and dispute resolution mechanisms.

• Proof of legitimate funding sources and timely disclosures of capital injections.

• Customer identification using independent documentation and safeguards against impersonation in remote transactions.

Context: Why This Matters Now

• Digital credit in Kenya is extensive: DFSAK estimates around eight million Kenyans borrowed KSh 180 billionin 2024 alone.

• Alarming default rates: Non-performing digital loans reached nearly 40% of disbursements in 2024, far surpassing bank loan default averages.

• Previous framework gaps: The CBK began regulating digital credit providers (DCPs) in 2022, licensing over 126 providers. However, gaps remain, prompting expansion to all non-deposit-taking credit providers (NDTCPs) via the 2025 draft.

Summary Table

What’s Next?

Feedback is open from stakeholders and the public until September 5, 2025, after which CBK will likely finalize and gazette the rules. Digital lenders will then have six months to comply with the new regime.