How CBK can address digital lender licensing challenges

The digital financial landscape in Kenya has undergone significant transformation with the emergence of digital credit providers (DCPs), which has created significant opportunities for financial inclusion and innovation.

Recognizing the importance of regulating this emerging sector, the Central Bank of Kenya (CBK) was granted the power to license and supervise DCPs under the Central Bank Act and subsidiary regulations promulgated in March 2022. The purpose of these regulations was to ensure an organized and safe financial ecosystem that protects consumers while supporting innovation. However, implementing the licensing process has proven challenging, leading to significant delays and frustration among applicants.

Regulatory framework and current licensing status

Under the Regulations, CBK is obliged to grant a DCP license within 60 days from the date of receipt of a complete application, provided that the applicant meets all specified requirements. This 60-day timeframe was intended to facilitate a quick and efficient process, driving the development of the digital lending market. However, despite receiving over 500 applications since the publication of the Regulations, CBK has so far issued only 51 licenses and none within the stipulated 60-day period. This situation indicates the need for process improvements.