The National Assembly Committee on Finance and National Planning has initiated efforts to regulate the Buy-Now-Pay-Later (BNPL) credit sector through new legislation. This follows public consultations on three key Bills designed to amend existing laws governing digital lending in Kenya.
The proposed amendments are outlined in the Tax Laws (Amendment) Bill 2024, the Tax Procedures (Amendment) Bill 2024, and the Business Laws (Amendment) Bill 2024. These changes are a response to a petition from boda boda operators, who have raised concerns about exploitation by BNPL firms.
The proposed legislation includes essential consumer protections to shield borrowers from predatory lending practices. It sets clear conditions for micro-lending, outlines financial costs associated with micro-loans, and defines the rights and responsibilities of both borrowers and lenders.
To combat illegal non-deposit-taking credit businesses, the Bills propose an amendment to the Central Bank Act, requiring these lenders to be licensed and regulated by the Central Bank of Kenya. This will bring previously unregulated credit providers under official oversight and ensure they adhere to a code of conduct enforced by the Central Bank.
Additionally, the Business Laws (Amendment) Bill, 2024 mandates that non-deposit-taking microfinance businesses provide consumers with accurate information about loan terms, financial costs, and maintain borrower confidentiality, promoting transparency in the sector.
The Bills also introduce stricter requirements for digital lenders, building on ongoing initiatives by the Office of the Data Commissioner and the Central Bank. They prohibit lenders from harassing or using violence during debt collection, ensuring ethical practices in loan recovery.
The Bill states: “During debt collection or loan recovery, non-deposit-taking microfinance businesses are prohibited from harassing, abusing, or oppressing borrowers or guarantors, using threats or violence, or employing obscene or profane language.”
If the Bills pass, lenders who fail to comply with these provisions will face penalties, further tightening regulations in Kenya’s BNPL sector.
