Date of Assent: 11th December 2024
Date of Commencement: 27th December 2024
The Business Laws (Amendment) Act, 2024 introduces critical changes to various financial regulations, particularly impacting banks, credit providers, and financial technology services. Below are the key amendments and their implications:
- Increased Penalties for Non-Compliance (Banking Act, Cap. 488)
The Central Bank of Kenya (CBK) now has broader authority to impose penalties of up to KES 20 million on financial institutions, credit reference bureaus, and other regulated entities for failing to comply with banking laws and prudential guidelines.
Additional daily penalties of up to KES 100,000 may be imposed for continued non-compliance.
Implication: Stricter enforcement of banking regulations, requiring financial institutions to enhance compliance measures. - Gradual Increase in Minimum Core Capital for Banks
Banks and mortgage finance companies must increase their core capital progressively, reaching KES 10 billion by December 31, 2029.
The phased implementation starts with KES 1 billion by the end of 2024 and increases incrementally over five years. Implication: Smaller banks may face challenges in meeting capital requirements, potentially leading to mergers or acquisitions. - Regulation of Non-Deposit Taking Credit Providers (CBK Act, Cap. 491)
The term “digital lenders” has been replaced with “non-deposit taking credit providers” to broaden regulatory scope.
The CBK now has the power to:
1. License, regulate, and supervise non-deposit taking credit providers.
2. Approve lending channels and set pricing parameters for credit.
3. Enforce a code of conduct for these lenders. Implication: All non-bank credit providers, including Buy-Now-Pay-Later (BNPL) services and peer-to-peer lending platforms, must now comply with CBK’s licensing and regulatory requirements. - Licensing and Regulation of Credit Guarantee Companies
A new regulatory framework for credit guarantee businesses has been introduced.
Credit guarantee companies must now:
1.Register and obtain a license from CBK.
2. Meet capital adequacy and liquidity requirements.
3. Unlicensed credit guarantee businesses face fines of up to KES 10 million for corporate entities and KES 1 million for individuals. Implication: More structured credit guarantees to support SME financing, but compliance costs may increase. - Stricter Consumer Protection in Microfinance
Non-deposit taking microfinance businesses must:
1. Disclose loan terms transparently.
2. Ensure fair debt collection practices (no harassment or intimidation).
3. Comply with data protection laws.
Harsh penalties apply for non-compliance, including fines of up to KES 2 million or imprisonment for up to five years. Implication: Improved borrower protection, but stricter requirements for microfinance institutions. - Key Takeaways for Financial Institutions
1. Banks must increase their capital reserves over the next five years.
2. Non-bank lenders (BNPL, fintech credit providers) must now obtain CBK licenses.
3. Financial institutions must tighten compliance as CBK’s regulatory oversight expands.
4. Credit guarantee businesses must register and obtain licenses to operate legally.
5. Microfinance institutions must adhere to strict consumer protection rules or face penalties. - Next Steps
Financial institutions should conduct regulatory impact assessments and adjust their compliance strategies accordingly. Engage legal and financial advisors to ensure seamless adaptation to these new changes.
For further clarification on how these amendments affect your business, feel free to reach out.