First-step analysis: fintech regulation in Kenya


Financial regulation

Regulatory bodies

Which bodies regulate the provision of fintech products and services?

They include the following:

Regulated activities

Which activities trigger a licensing requirement in your jurisdiction?

The following activities trigger a requirement to be licensed by the Capital Markets Authority if the investments in question relate to securities issued to the public:

  • arranging (bringing about) deals in investments;
  • making arrangements with a view to transact in investments;
  • dealing in investments as principal or agent; and
  • advising on investments.


Foreign exchange trading also requires a licence issued by the Capital Markets Authority.

Deposit-taking business and provision of payment services require licensing and authorisation by the Central Bank of Kenya. Lending, factoring and invoice discounting do not require licensing.

Consumer lending

Is consumer lending regulated in your jurisdiction?

Consumer lending constitutes a financial service that does not require licensing in Kenya. However:

  • if the funds used for lending constitute deposits held from members of the public, a license issued by the Central Bank of Kenya is required;
  • persons undertaking consumer lending must comply with the business set-up requirements in Kenya, including the obligation to obtain a business permit from the applicable county government where their business premises are located; and
  • persons undertaking consumer lending must comply with the requirements of the Consumer Protection Act 2012, which include disclosure requirements and restrictions against imposition of penalty charges and prepayment penalties


There have been a number of statements by the Central Bank of Kenya on the issue of regulating consumer lending by digital platforms. The first attempt to do this was through the Financial Markets Conduct Bill 2018, which sought to introduce a new prudential regulator in the financial services sector. The Bill went through public participation but is yet to be introduced to Parliament. In addition to the Financial Market Conduct Bill 2018, there have also been proposed amendments to the Central Bank of Kenya Act through two Central Bank of Kenya (Amendment) Bills in 2020 and the Central Bank of Kenya (Amendment) Bill 2021 to provide for the regulation of digital lending by the Central Bank of Kenya. These Bills are under consideration in parliament. 

Secondary market loan trading

Are there restrictions on trading loans in the secondary market in your jurisdiction?

There are no regulatory restrictions on trading loans in the secondary market. If the loans constitute debt securities issued to the public, however, the requirements of the capital markets legislation with regard to issuance of securities to the public apply. These include the need to obtain the approval of the Capital Markets Authority.

Collective investment schemes

Describe the regulatory regime for collective investment schemes and whether fintech companies providing alternative finance products or services would fall within its scope.

Collective investment schemes are regulated by the Capital Markets Authority under the Capital Markets Act 2012 and the Capital Markets (Collective Investment Schemes) Regulations 2001 issued thereunder.

These laws regulate any alternative financial products or services that fall within the definition of a CIS. This means that any platform or marketplace that satisfies the following would be considered a CIS:

  • the platform or marketplace collects and pools funds from the public or a section of the public in Kenya for the purpose of investment; and
  • the funds collected are managed by or on behalf of the scheme by the promoter.


Considering the above definition, there is a greater likelihood of a crowdfunding platform being deemed a collective investment scheme than a peer-to-peer or marketplace lending platform. To the extent that the fintech innovation will be regarded as a collective investment scheme, it must be registered with the Capital Markets Authority, which will regulate the activities of the scheme if approved.

The Capital Markets Authority, on 28 May 2020, published a note titled ‘Guidance for Collective Investment Schemes on Valuation, Investment Performance Measurement Reporting and other Related Matters’ in recognition of the need to standardise practices in the sector. The Guidance is in draft form and is awaiting public participation. It seeks to ensure that fund managers of collective investment schemes have developed comprehensive investment policies and procedures to govern the valuation of assets. In addition, the fund manager would be required to prepare and submit to the Authority a performance measurement report q
uarterly in addition to the existing reporting obligations.

Alternative investment funds

Are managers of alternative investment funds regulated?

Yes. If the alternative investment fund is a collective investment scheme as defined in the Capital Markets Act 2012, it may only appoint a person who is licensed by the Capital Markets Authority as a fund manager to manage it.

If the alternative investment fund does not constitute a collective investment scheme and is, therefore, not regulated by the Capital Markets Authority, the manager may still have to be regulated as a licensed investment adviser or fund manager, depending on the amount of the portfolio managed on behalf of the fund. An investment adviser may manage a portfolio of up to 10 million Kenyan shillings, whereas a fund manager’s licence would be required to manage a portfolio exceeding 10 million Kenyan shillings.

Peer-to-peer and marketplace lending

Describe any specific regulation of peer-to-peer or marketplace lending in your jurisdiction.

Except to the extent that peer-to-peer or marketplace lending constitute collective investment schemes, these are not generally regulated activities in Kenya.

If these activities are provided in conjunction with a regulated entity (such as banks, financial institutions or payment service providers), the product may be subject to approval by the relevant regulator (being the Central Bank of Kenya), as well as compliance with regulations or guidelines issued by the regulator.


Describe any specific regulation of crowdfunding in your jurisdiction.

There are no specific laws or regulations concerning crowdfunding in Kenya. However, the laws governing the financial services sector are, in many instances, broadly drafted. Consequently, crowdfunding may be considered a regulated activity thereunder. For instance:

  • dealing in securities, offering securities to the public or a section thereof, and marketing securities are regulated activities under the Capital Markets Act 2012 and the subsidiary legislation issued thereunder; thus, equity crowdfunding and, depending on the nature of the rewards, reward-based crowdfunding would be regulated; and
  • by virtue of the fact that crowdfunding facilitates the transfer of value, it may fall within the regulatory ambit of the anti-money laundering and countering the financing of terrorism regulator, the Financial Reporting Centre, and would be subject to the Proceeds of Crime and Anti-Money Laundering Act 2009 and the Prevention of Terrorism Act 2012.

Invoice trading

Describe any specific regulation of invoice…


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