The Business Laws (Amendment) Act, 2024 (Act) was enacted into law on 11 December 2024 and became effective on 27 December 2024.

The Act provides for several changes that affect the banking and financial sector.

These changes include:

Penalties

The Act amends the Banking Act (Chapter 488, Laws of Kenya) by updating the penalties for non-compliance applicable to financial institutions, credit reference bureaus and other persons (including corporates and individuals).

One of the penalties the Act has introduced for financial institutions and credit reference bureaus is an amount equal to three times the gross amount of the monetary gain made or loss avoided by the failure or refusal to comply.

Core capital   

The Act has introduced a gradual increase in banks' and mortgage finance companies' core capital to KES 10 billion by the end of the year 2029. This is likely to result in mergers and acquisitions of smaller banks.

Regulations of credit business

The Act brings all credit providers under the regulation of the Central Bank of Kenya (CBK). Credit providers are defined to include persons undertaking the business of:

    'buy now pay later' and 'pay as you go' arrangements;
    peer-to-peer lending under collective investment schemes;
    credit guarantee business;
    asset financing; and
    'granting of credit facilities to members of the public, with or without interest, and either secured or unsecured'.

Regulation of non-deposit-taking microfinance companies

The Act provides for the regulation of entities undertaking non-deposit-taking microfinance business. Non-deposit-taking microfinance business has been defined to include the business of providing physical credit (that is, the provision of credit where a lender takes movable or immovable security but does not include acceptance of cash collateral).

The Act provides for a six-month transition period for persons currently undertaking non-deposit-taking microfinance businesses to comply with the new provisions.

Credit guarantee businesses  

The Act provides for the regulation of credit guarantee businesses. It requires credit guarantee providers to be registered and licensed by the CBK. It defines 'credit guarantee business' to include the business of providing a guarantee to a lender for absorption of the lender's risk on a credit facility to a borrower.

The Act exempts from the licensing requirement:

    foreign credit guarantee providers who are owned by foreign governments or by foreign financial institutions, which have entered into agreements with the Government of Kenya; and
    foreign credit guarantee providers who partner with local financial institutions to provide credit guarantee services.

The Act provides for a five-year transition period.

Conclusion

We expect that the CBK will enact regulations to give effect to the provisions of the Act. In the meantime, we advise businesses affected by the changes introduced by the Act to prepare to comply with the new law.