MasiboLaw

By Meshack Masibo

The Buy Now Pay Later (BNPL) financing model has rapidly gained popularity in Kenya, allowing consumers to purchase items and pay in instalments, either interest-free or with interest. Previously, BNPL providers in Kenya operated without specific regulatory oversight and did not require a licence. However, the Business Laws (Amendment) Act 2025, brought BNPL firms under the supervision of the CBK, requiring compliance with the Digital Credit Providers Regulations, 2021.

Understanding BNPL and Its Regulatory Framework

1. Mandatory Licensing Requirement

• No entity can operate a digital credit or buy now pay later business in Kenya without a CBK-issued license.
• Violators face a fine of KES 500,000, up to 3 years imprisonment, or both.

2. Application Process

• Existing buy now pay later (BNPL) providers (previously unregulated) have six months from the regulation enactment to apply. This ends on 13th June 2025.
• New applicants must apply using Form CBK DCP 1.

3. Eligibility Criteria

• The applicant must be a registered company under the Companies Act.
• Significant shareholders, directors, and CEOs must meet the “fit and proper” criteria outlined in the Third Schedule of the Regulations.

4. Required Documents & Information

Corporate Documents:

• Certificate of Incorporation
• Memorandum & Articles of Association

Business Operations:

• Description of ICT systems and digital credit delivery platforms.
• Credit product details and agreements with service providers.

Regulatory Compliance:

• AML/CFT policies (Anti-Money Laundering & Countering the Financing of Terrorism)
• Data protection policies
• Corporate governance policies
• Consumer protection compliance measures

Financial Information:

• Proof of funding sources
• Pricing model and fee structure
• Payment of application fees

Additional Requirements:

• Shareholder details
• Credit policy and ethical guidelines
• Market conduct strategy
• Any other documents requested by CBK

CBK’s Evaluation Process

Upon submission of a complete application, the CBK assesses the following:

1. Company Background – Verifies the applicant’s history and operational track record.
2. Management Suitability – Evaluates the competence and integrity of directors and key personnel.
3. Funding Sources – Ensures the legitimacy and adequacy of the applicant’s investment funds.
4. Public Interest Considerations – Assesses the applicant’s adherence to responsible lending principles.

Processing Timeline

• The CBK processes license applications within 60 days from the date of submission but can be longer if the applicant doesn’t have all the requirements.
• Once approved, the license remains valid unless suspended or revoked due to non-compliance.

Post-Licensing Obligations

Licensed BNPL providers must adhere to ongoing compliance requirements, including:

• Annual Fees – Pay the prescribed annual fees by December 31 each year.
• Compliance Returns – Submit annual reports confirming adherence to the Act and Regulations.
• Registration with the Financial Reporting Center
• Notification of Changes – Inform CBK at least 30 days before making significant changes to shareholding, board composition, or management structure.

Penalties for Non-Compliance

Failure to comply with CBK regulations can result in:

• Fines and penalties
• License suspension
• Revocation of operating license

Conclusion

The integration of BNPL firms into Kenya’s regulatory framework reflects the government’s commitment to consumer protection and responsible lending. BNPL providers must carefully navigate the CBK licensing process to ensure full compliance and sustainable operations within the evolving fintech ecosystem.

For further information or assistance with the BNPL licensing process, you can reach us on info@masibolaw.co.ke