Parliament to CBK: Pause new credit rules for mobile digital lenders

Kenya's plans to tighten regulation of the non-bank lending industry have hit a parliamentary hurdle after the National Assembly's Committee on Delegated Legislation directed the Central Bank of Kenya (CBK) to suspend the rollout of new credit regulations and review provisions questioned by lawmakers.

The intervention followed a committee meeting on November 12, where MPs raised concerns about the regulator's proposed administrative powers, the clarity of some provisions and penalties that could reach Sh2 million.

The regulations were published as Legal Notice No.191 on September 29, 2026, replacing the previous Digital Credit Providers Regulations of 2022.

The committee now wants CBK officials to work with parliamentary legal counsel to review and redraft the disputed clauses.

Why CBK wants to regulate more lenders

Until recently, the CBK's non-bank lending oversight focused largely on digital credit providers, commonly known as digital lenders.

These include companies offering short-term loans through mobile applications, USSD platforms and other digital channels.

The Business Laws (Amendment) Act, 2024 expanded the regulator's mandate beyond digital lending to cover a wider range of businesses offering credit without taking deposits.

The new regulations therefore extend oversight to several financing arrangements, including:

• Digital and conventional loans: Secured and unsecured credit offered to members of the public, whether through mobile platforms or other channels.

• Buy-now-pay-later: Arrangements allowing customers to acquire goods or services and pay later.

• Asset financing: Businesses financing the purchase of vehicles, equipment and other assets.

• Stock-now-pay-later: Financing arrangements enabling traders to acquire stock and pay at a later date.

• Pay-as-you-go arrangements: Credit models where customers pay for products or services in instalments.

• Credit guarantees and qualifying peer-to-peer lending: Other forms of non-deposit-taking credit covered by the framework.

Banks, licensed microfinance institutions, regulated SACCOs and other providers whose credit activities are already governed by separate legislation are generally outside this particular framework.

What the new regulations require

The framework creates licensing and registration requirements depending on a provider's initial capital.

Businesses with initial capital of Sh20 million or more must obtain a CBK licence, while those below the threshold must register.

Registered providers whose capital, borrowings or loan books exceed the prescribed threshold may be required to convert to a licence.

Existing providers falling within the expanded regulatory framework have until March 29, 2027 to submit the appropriate applications.

They may continue operating while CBK considers their applications.

The regulations also introduce requirements covering corporate governance, customer information, loan pricing, data protection, credit assessment and debt collection.

Among the notable consumer-protection provisions are requirements for clear loan terms, restrictions on abusive collection practices, safeguards governing automated credit decisions and a prescribed order for applying repayments:

Principal first, followed by fees and charges, then interest.

Lenders seeking to sell a borrower's movable property used as security must also observe a 30-day notice requirement.

Why are MPs challenging the rules?

The committee's main concern is that some provisions give CBK broad discretion without clearly defining the limits of its powers.

Lawmakers questioned clauses allowing the regulator to demand additional documents or prescribe other functions without specifying the circumstances in which those powers could be exercised.

They also challenged the penalties under Regulation 86, which include administrative fines of up to Sh2 million or three times the financial gain made or loss avoided, whichever is higher, alongside additional daily penalties for continuing violations.

Senior officers responsible for certain violations may also face personal penalties of up to Sh250,000.

The committee argued that the penalty provisions raised questions under the Statutory Instruments Act.

The legal position requires careful scrutiny, however:

Section 57(4) of the amended Central Bank of Kenya Act separately gives CBK an express power to prescribe penalties using a Sh2 million or three-times-gain formula, together with continuing daily penalties.

The committee also criticised the drafting for being unnecessarily complicated and potentially difficult for businesses to interpret.

Have the regulations been cancelled?

No formal annulment of Legal Notice No.191 had been reported by November 13.

Under the Statutory Instruments Act, the Committee on Delegated Legislation scrutinises regulations and can recommend that Parliament annul all or part of an instrument. Formal annulment follows a resolution of Parliament.

The November 12 directive therefore concerns suspending the rollout while CBK reviews the disputed provisions.

It is not a court ruling that has struck down the regulations or a blanket cancellation of the new lending framework.