New Bill seeks to give CBK control over 'buy-now-pay-later' firms to curb exploitation
By Lucy Mumbi |
The Bill proposes the removal of definitions such as digital channel, digital credit, digital credit business, and digital credit provider from the Central Bank of Kenya (Amendment) Act, 2021.
A new Bill has been introduced in Parliament to give the Central Bank of Kenya (CBK) the power to control prices charged by buy-now-pay-later (BNPL) companies.
If passed, the Business Laws (Amendment) Bill, 2024, will place BNPL firms under CBK regulation to protect consumers from unfair practices.
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The Bill proposes the removal of definitions such as digital channel, digital credit, digital credit business, and digital credit provider from the Central Bank of Kenya (Amendment) Act, 2021.
These will be replaced by the terms "buy-now-pay-later" and "credit provider," which include non-deposit-taking credit providers.
According to the proposed amendments, such providers encompass entities offering both secured and unsecured loans, asset financing, credit guarantees, and peer-to-peer lending under collective investment schemes regulated by the Capital Markets Act.
The Bill defines BNPL arrangements as agreements where consumers purchase goods or assets and pay in instalments, with or without interest. It excludes hire purchase agreements governed by the Hire Purchase Act.
The proposed law states: “Section 2 of the Central Bank of Kenya Act is amended by inserting buy-now-pay-later arrangements as determined by the Bank but does not include hire purchase agreements governed by the Hire Purchase Act.”
Exploitation
The legislation aims to address growing concerns over the lack of regulation in Kenya’s expanding BNPL sector. Complaints have surfaced about predatory lending practices, with borrowers, including boda boda operators, alleging exploitation and unfair treatment.
Some of the BNPL providers operating in Kenya include Lipa Later, Aspira, Loop, Safaricom, M-KOPA, and MasterCard.
Their rapid growth in recent years has drawn scrutiny from regulators and lawmakers alike.
Earlier this year, MPs urged the CBK to propose legislative changes that would grant it control over BNPL firms.
Molo MP and National Assembly Finance Committee chairman Kuria Kimani highlighted specific grievances, including cases of motorbikes being repossessed before borrowers completed repayment.
“We strongly feel that a gap or legal lacuna is preventing a complete oversight of the buy-now-pay-later firms by the CBK. The products they offer are not licensed as DCPs,” he said.
National Assembly Majority Leader and Kikuyu MP Kimani Ichung’wah, who sponsored the Bill, noted that the changes would clarify the legal status of BNPL firms.
"The new definitions also clarify that certain credit businesses such as buy-now-pay-later credit services and peer-to-peer lending and asset financing are covered under the law, thereby addressing the uncertainty that has existed since the law came into force,” he said.
The government has also proposed changes to another law, the Movable Property Security Rights Act, to allow CBK to control hire purchase costs. CBK would set interest rates for such agreements, though the hire purchase registry will remain under the Business Registration Service.
If passed, the new rules will strengthen consumer protection and improve oversight of Kenya’s fast-growing credit market.
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