The Central Bank of Kenya (CBK) has introduced draft regulations to bring order and oversight to the emerging credit guarantee business and digital lenders.
The move follows amendments made under the Business Laws (Amendment) Act, 2024, which incorporated new provisions into the CBK Act (Cap. 491).
Consequently, CBK has invited Kenyans, businesses, and other stakeholders to give their views on draft regulations for the credit guarantee business.
The proposed rules, published on September 25, 2025, are designed to guide licensing, governance, and supervision of digital lenders and companies offering loan guarantees in Kenya.
What is a Credit Guarantee Business?
A credit guarantee business is a form of loan insurance. It provides a promise to lenders that, in the event a borrower defaults, the guarantor will absorb part or all of the loss.
The model makes lenders more willing to extend credit, especially to riskier borrowers such as micro, small, and medium-sized enterprises (MSMEs), startups, and small-scale traders.
Under the new law, a credit guarantee company is defined as a company limited by shares, incorporated or registered under the Companies Act, and licensed by CBK to provide such guarantees.
These companies now form part of what the law recognizes as non-deposit-taking credit business.
Also Read: CBK Releases New List of Digital Lenders in Kenya
CBK Role and Regulatory Powers Under the New Rules
CBK has been given clear authority to regulate and supervise all licensed credit guarantee companies.
Its powers cover every stage of the business, from entry requirements to ongoing operations.
These include licensing and registration. Any person intending to operate a credit guarantee business must first apply for registration under section 33W of the CBK Act.
Once registered, they must apply for a licence under section 33X before commencing operations.
It also includes capital and liquidity standards. CBK will prescribe minimum capital adequacy and liquidity requirements to ensure companies remain financially sound.
Additionally, the Bank will assess the professional and moral suitability of individuals managing or controlling the companies, approve boards, management teams, and external auditors, and certify significant shareholders as fit and proper.
CBK will conduct on-site and off-site supervision, direct changes where necessary, and impose administrative or monetary sanctions for non-compliance.
The regulation of credit guarantee businesses is expected to strengthen the country’s financial system.
For lenders, the rules provide confidence that guarantees are backed by credible, well-capitalized entities. On the other hand, for MSMEs, startups, and other borrowers, this oversight could translate into better access to affordable loans.
Also Read: CBK Releases New List of Digital Lenders in Kenya
Digital Lenders and Entities Who Must Comply
The regulations apply to all entities in Kenya offering credit guarantee services.
Those already operating in the market before the new rules came into force will be given a five-year transition period to register and obtain the necessary licence.
However, there are providers who are exempt from the licensing requirement.
They include credit guarantee providers owned by a foreign government, which have agreements with the Government of Kenya, and providers supported by international financial institutions operating under agreements with the Government to serve specific sectors or regions.
Furthermore, companies registered outside Kenya that have partnered with local financial institutions to deliver guarantees, as well as banks that already offer credit guarantees as part of their regular business under the Banking Act, are exempt.
Fines and Penalties Under the CBK Act
CBK has outlined detailed monetary and criminal penalties for entities operating in Kenya’s credit, guarantee, and financial services markets.
Below is a summary of the key fines depending on the type of institution and the nature of the offence.
1. Non-Deposit Taking Credit Providers (Part VIC)
| Offense Category | Offender Type | Maximum Fine Amount |
|---|---|---|
| Operating Without a Licence | Natural Person | Five million shillings, or imprisonment up to three years, or both. |
| Operating Without a Licence | Body Corporate | Five million shillings, or imprisonment up to three years, or both. |
| Regulatory Non-Compliance (via Regulations) | Body Corporate/Credit Provider | Two million shillings, OR three times the gross amount of the monetary gain made or loss avoided (whichever is higher). |
| Regulatory Non-Compliance (via Regulations) | Additional Penalty (Daily) | Not exceeding ten thousand shillings for each day the failure continues. |
| AML/CFT Violations | Legal Person (e.g., Digital Credit Provider) | Penalty not exceeding five million shillings. |
| AML/CFT Violations | Natural Person (e.g., Director, Officer, Agent) | Penalty not exceeding one million shillings. |
| AML/CFT Violations | Additional Penalty (Daily) | Not exceeding one hundred thousand shillings per day during the violation. |
2. Credit Guarantee Companies (Part VID)
| Offense Category | Offender Type | Maximum Fine Amount |
|---|---|---|
| Operating Without Registration | Natural Person | One million shillings, or imprisonment up to three years, or both. |
| Operating Without Registration | Body Corporate | Ten million shillings. |
| Operating Without a Licence | Natural Person | One million shillings, or imprisonment up to three years, or both. |
| Operating Without a Licence | Body Corporate | Ten million shillings. |
| Providing False Information to Obtain Licence | Natural Person | One million shillings, or imprisonment up to three years, or both. |
| Providing False Information to Obtain Licence | Body Corporate | Ten million shillings. |
3. Specified Banks and Microfinance Banks (Reserve Requirements)
| Offense Category | Offender Type | Penalty Charge |
|---|---|---|
| Failure to Maintain Minimum Cash Balances | Institution | Penalty not exceeding one percent per day on the amount of the deficiency or ten thousand shillings, whichever is higher, for each day the deficiency continues. |
4. Authorized Dealers (Foreign Exchange Business)
| Offense Category | Offender Type | Maximum Fine Amount |
|---|---|---|
| Transacting Foreign Exchange Business Without Licence | Any Person | Five hundred thousand shillings, or imprisonment up to three years, or both. |
| Contravening Regulation of Payments (e.g., between residents/non-residents) | Any Person | Five hundred thousand shillings, or imprisonment up to three years, or both. |
| Failing to Comply with Instructions/Directions | Any Person | Five hundred thousand shillings, or imprisonment up to three years, or both. |
| General Penalty under Part VIA | Any Person | Five hundred thousand shillings, or imprisonment up to three years, or both. |
| Failure to Comply with Guidelines/Directions (via Regulations) | Authorized Dealer | Not exceeding five hundred thousand shillings. |
| Failure to Comply with Guidelines/Directions (via Regulations) | Natural Person | Not exceeding two hundred thousand shillings. |
| Failure to Comply with Guidelines/Directions (via Regulations) | Additional Penalty (Daily) | Not exceeding ten thousand shillings for each day the failure continues. |
5. General Penalties
| Offense Category | Offender Type | Maximum Fine Amount |
|---|---|---|
| Offenses without Specific Penalties | Any Person | Fine not exceeding five hundred thousand shillings, or imprisonment for a term not exceeding three years, or both. |
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