The Central Bank of Kenya (“CBK”) was recently vested with the powers to license and regulate digital lenders in Kenya under a new law, The Central Bank of Kenya (Digital Credit Providers) Regulations 2022 (“Regulation 2022”) effective from 18th March 2022. Before 2022, digital lending business in Kenya has been unregulated and was free for all interested persons. The Regulation 2022 came into existence as a result of the growing concerns over abusive and predatory lending practices by digital loan providers in Kenya including their costly interest rates which trigger mass defaults and the abuse of personal information of consumers amongst others other criminal activities.
The Regulation 2022 provides, amongst others, the licensing authority and requirements, permissible activities of a digital credit provider, timeline of sixty (60) within which licence must be granted (provided the CBK is satisfied with the application), mandatory corporate governance and data protection policies, prohibition of money laundering activities, reporting obligations of digital credit providers, sanctions for infraction and other sundry issues. See our previous articleon How to Get a Digital Licence in Kenya.
Since the introduction of the new regulation, digital lenders cannot do business in Kenya unless they are incorporated and licensed by the CBK. In order to rise to its responsibilities under the Regulation 2022, the CBK is going all out to ensure effective regulation of Kenya’s digital economy and enforcement of the Nation’s laws against offenders. Existing digital lenders have a grace period of six (6) months to apply for the licence of the CBK.
The enforcement of Kenyan regulation by the CBK through third-party service providers presents an interesting angle to the entire spectrum of doing digital lending business in Kenya. The CBK has apparently struck a very effective deal with tech-giants like Google and payment companies to ensure that they only provide their services to only licensed and compliant digital lenders in Kenya.
ENFORCEMENT BY GOOGLE
It is now mandatory for Digital lenders in Kenya to now file a self-declaration form and licence from the CBK with Google, in order to have their Apps on Google Play Store. In demonstrating cooperation with CBK, Google published new policies that will force digital lenders to disclose the requirements from the banking regulator within a month in order to remain or publish new personal loan apps on Play Store.
Google in its policy update stated as follows:
“Digital Credit Providers (DCP) should complete the DCP registration process and obtain a license from the Central Bank of Kenya (CBK). You must provide a copy of your license from the CBK as part of your declaration.”
According to Google, “Currently we only accept declarations and licenses from entities published under the Directory of Digital Credit Providers on the official website of the CBK.”
So, in order for all new and old loan apps in Kenya to be active on Google play store, the owners of the loan apps must be licensed by the CBK and submit the requisite documents and information to Google or risk being locked out at the end of January 2023.
It is also important to note that Apps that do not offer loans directly but offer their platform to other mobile lender apps, will be required to provide licences of the digital lender players they host on their platform. According to the new Google policy,
“If you are not directly engaged in money lending activities and are only providing a platform to facilitate money lending by registered DCP(s) to users, you will need to accurately reflect this in the declaration and provide a copy of the DCP license of your respective partner(s),”
You can also read more on How to Set up a Digital Lending Business in Kenya
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About KORIAT & CO.
We are a commercial law firm in Lagos, Nigeria with network of lawyers and consultants in Kenya, Ghana and Rwanda. The above article is not legal advice and does not automatically make our readers our clients unless they specifically instruct us to act or represent them in any way.
Please contact Koriat & Co. through admin@koriatlaw.com or 09067842241 if you require additional information about or assistance in making the application for a digital lender’s licence.
