Digital Credit Provider licence in Kenya
How to obtain a Digital Credit Provider Licence in Kenya
The Digital Credit Lending market in Kenya presents a promising opportunity for both local and foreign investors and to capitalize on this growth, obtaining a Digital Credit Provider(DCP) license from the Central Bank of Kenya (CBK) is essential.
New potential DCPs will start at stage 1: Approval of Name, whereas existing DCPs (already incorporated) will start with Stage 2: Application for License.
The following are the key steps to be followed in applying for a license to operate as a DCP: –
Step 1: Name Approval
- Read the regulations set by the Central Bank of Kenya (CBK) on how to obtain a digital credit provider licence in Kenya.https://www.centralbank.go.ke/wp-content/uploads/2022/03/L-.N.-No.-46-Central-Bank-of-Kenya-Digital-Credit-Providers-Regulations-2022.pdf
- Choose 3 business names and check their availability with the company registry.https://brs.go.ke/
- Submit your preferred names to CBK for approval, along with details about your business and funding sources.
- Once approved, register your company with the chosen name.https://afrilinkconsultants.com/register-a-company-in-kenya/
Step 2: License Application
- Create an online account on the CBK website.https://www.centralbank.go.ke/
- Fill out and submit the license application form.
- Download and complete forms for directors, officers, and major shareholders.
- Upload all the completed forms and additional documents:
- Business plan details
- Company registration documents
- Information on shareholders and funding
- Descriptions of your technology, products, and services
- Anti-money laundering and data protection policies
- Customer complaint handling procedures
- Business conduct policies
- Background checks for key personnel
Stage 3: Data Submission Testing and Licensing
- Data Submission Testing: The CBK, after approving the application, requires the applicant to demonstrate their ability to submit required data (regulatory reports) using the CBK’s specified APIs. The CBK will provide guidance on this process.
- License Fee Payment: Upon notification from the CBK, the applicant must pay a non-refundable license fee of Ksh. 20,000.
- License Issuance: If all licensing requirements are met, including successful data submission testing, the CBK will issue a license to the digital credit provider.
- Public Notice:Upon approval, The CBK publishes the names of licensed digital credit providers in the Kenya Gazette and on its website.
What are the key requirements for obtaining a Digital Credit Provider license?
- Capital Requirements: A minimum capital requirement is set by the Central Bank of Kenya (CBK).
- Fit and Proper Persons: Key personnel must meet specific criteria regarding experience and integrity.
- IT Infrastructure: A robust IT system is required to manage lending operations effectively.
- Risk Management Framework: A comprehensive risk management framework is essential.
- Compliance with Regulations: Adherence to CBK regulations and data protection laws.
The Central Bank of Kenya (CBK) evaluates several key factors when considering a Digital Credit Provider (DCP) license application. These factors include;
- Financial Strength: Adequate capital, sound financial practices, and robust risk management ensure the lender’s stability.
- Management Quality: An experienced team, effective governance, and strong internal controls contribute to efficient operations and sound decision-making.
- Technological Capability: Reliable IT systems, data security, and compliance with regulations facilitate seamless operations and protect customer data.
- Consumer Protection: Fair lending practices, clear terms, and effective grievance mechanisms promote a positive customer experience.
- Regulatory Compliance: Adherence to all relevant laws and regulations guarantees a sustainable and ethical business.
By assessing these factors, the CBK aims to protect consumers and ensure the stability of the digital credit industry.
Additional Notes:
- Existing companies can skip the name approval step when applying for a license.
- You will need to provide supporting documents to prove your financial stability and the source of your funds.This ensures compliance.
- Ensure you have a robust technology infrastructure and clear policies in place.
NB; Remember, this is a simplified overview on how to obtain a digital credit provider licence in Kenya. It’s always best to refer to the official CBK website for the latest and most detailed information.
The Central Bank of Kenya (CBK) has the authority to revoke or suspend the license of a digital credit lender for various reasons outlined in the Digital Credit Providers Regulations, 2021. Here are some of the grounds for such action:
- Providing False Information: If a digital credit lender provided false information during the license application process then the CBK can revoke or suspend their Digital Credit Provider license.
- Cessation of Business: If a digital credit lender ceases to operate its business, the CBK may revoke their license.
- Liquidation or Winding Up: If a digital credit lender goes into liquidation or an order is issued for winding up then the CBK can revoke their license.
- Non-Compliance with Licensing Conditions: If a digital credit lender fails to meet or violates any of the licensing conditions imposed by the CBK then their license may be revoked or suspended.
- Carrying Out Unauthorized Activities: If a digital credit lender engages in activities that are outside the scope of their licensed activities then the CBK will take action against their license.
- Breach of Data Protection or Consumer Protection Laws: If a digital credit lender violates the Data Protection Act or the Consumer Protection Act then the CBK may take action against their license.
The Central Bank of Kenya (CBK) assesses each case individually to determine if a license should be revoked or suspended, considering the specific circumstances.To avoid penalties and license revocation, digital credit lenders must strictly adhere to all regulations and guidelines set forth by the CBK..
FAQs on Obtaining a Digital Credit Lender License in Kenya
1. Who is eligible to apply for a digital credit lender license in Kenya? Any company incorporated in Kenya can apply.
2.How often is the Digital Credit Lender license renewed? The Digital Credit Provider (DCP) license in Kenya is renewed annually. You must submit your renewal application to the Central Bank of Kenya (CBK) on or before December 31st of each year.
3.How long does approval of the Digital Credit Lender license take in Kenya? The Central Bank of Kenya (CBK) aims to process DCP license applications within 60 days of receiving a complete application.
Need more information or have specific questions? Contact us today for a free consultation @ clientservice@afrilinkconsultants.com /+254707280366
