The Central Bank of Kenya (CBK) has published the Draft Central Bank of Kenya Credit Guarantee Business Regulations, 2025 (draft regulations). This follows the enactment of the Business Laws (Amendment) Act, 2024 (BLAA), which expanded the scope of regulation under the Central Bank of Kenya Act (CBK Act) to cover credit guarantee providers.
The CBK invited comments on the Draft Regulations by Wednesday, 15 October 2025. A copy of the Draft Regulations is available here.
Overview of CBK draft regulations
The draft regulations aim to establish a regulatory framework for the registration, licensing, governance, risk management and operation of credit guarantee businesses in Kenya.
An overview of some of the key provisions of the draft regulations follows.
Scope and applicability
The draft regulations apply to the business of providing a guarantee to a lender by absorbing all or part of the lender’s risk on a credit facility made to a borrower in case of default.
The CBK Act and the draft regulations require any person intending to carry on credit guarantee business to be registered and licensed by the CBK.
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The CBK and the draft regulations, however, exempt from the licensing requirement licensed banks and foreign credit guarantee providers who:
- are owned by foreign governments or by foreign financial institutions, which have entered into certain agreements with the Government of Kenya; or
- partner with local financial institutions to provide credit guarantee services.
Prohibited activities
Credit guarantee companies are restricted from providing credit facilities, conducting deposit-taking activities, engaging in trade (except in the satisfaction of debts), excessive shareholding in other undertakings, unauthorized land acquisition, incurring certain financial risks, managing third-party pension funds, and other activities not expressly permitted by the CBK.
Restrictions on shareholding
The single shareholder limit for credit guarantee companies is capped at 25%, with exceptions for shareholders who are public entities and multilateral development banks. The CBK has the power to exempt an entity from these restrictions.
Capital requirements
Credit guarantee companies are required to maintain a minimum capital of KES 1 billion and liquidity levels set out in the draft regulations.
Credit guarantee operations
Guarantees may only be extended to lenders meeting specified prudential criteria. The terms and conditions of guarantees must be clearly disclosed, and any changes to guarantee limits require CBK approval. The classification and provisioning of guarantees must align with the classification of underlying loans, with minimum provisioning percentages prescribed for different risk categories.
Invocation and enforcement of guarantees
The draft regulations set out conditions for invoking guarantees and timelines for claim validation and settlement.
Notably, credit guarantee companies must provide an irrevocable bank guarantee of KES 1 million or 10% of outstanding exposures as at the end of each calendar year (whichever is higher) to CBK as security for outstanding exposures.
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Failure to honor guarantees or penalties may result in recovery from the said bank guarantee and further sanctions.
Enforcement and sanctions
The CBK is vested with broad enforcement powers, including the imposition of monetary penalties, suspension or revocation of registration or licences, restrictions on business activities, and disqualification of directors or officers. The CBK may also intervene in the management of a credit guarantee company in cases of financial distress or serious non-compliance.
Transitional provisions
Any person presently carrying on credit guarantee business, and who is not regulated under any other law, is required to apply for registration and licensing and comply with the provisions of the draft regulations by 27 December 2029.
This article was written by Dominic Indokhomi, Partner, Cyntia Amutete, Senior Associate, and Nairuko Kantai, Associate, Bowmans Kenya.
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