BNPL and Asset Finance Under Kenya’s 2026 Credit Rules

Buy now pay later, asset finance and pay as you go models all sit on the boundary between selling and lending, and that boundary has moved. Since 29 September 2026, the Central Bank of Kenya (Non-Deposit Taking Credit Providers) Regulations, 2026 (Legal Notice 191 of 2026) have expressly pulled these models into the Central Bank of Kenya (CBK) regime. This article explains how the Regulations treat each model, which carve-outs remain and what the operating rules mean for the commercial structure.

What the Law Now Says

The Central Bank of Kenya Act, as amended by the Business Laws (Amendment) Act, 2024, defines non-deposit taking credit business to include asset financing “whether directly or through a third-party financier”, buy now pay later arrangements as determined by CBK (other than hire purchase agreements governed by the Hire-Purchase Act) and pay as you go arrangements as CBK may determine.

The Regulations then define a “loan” as any credit facility, advance or loan product, including buy now pay later, stock now pay later and peer to peer lending offered by the lender. A “pay as you go” arrangement is one where a consumer gets the use of an asset by making partial or periodic payments, intending to own it, while the provider keeps the right to restrict, deactivate or repossess the asset on non-payment (regulation 2). Because these products are “loans”, every conduct rule in the Regulations that applies to a loan applies to them.

The Carve-Outs, and Their Limits

Three exclusions in regulation 3(3) matter most to this sector:

• Incidental credit (3(3)(f)). A seller whose primary business is goods or services and whose credit is merely incidental to its own sales is outside the regime. Regulation 18(3) defines “merely incidental” as credit that does not form the core business of an entity but is offered from time to time to customers to enable them to access goods and services offered by a seller, and it does not include hire purchase or leasing business.
• Hire purchase (3(3)(h)). Arrangements involving the bailment of goods under the Hire Purchase Act are excluded. The exclusion depends on the arrangement actually being a hire purchase agreement under that Act, whatever label the product carries.
• Lease finance (3(3)(g)). Only lease finance transactions regulated under a written law are excluded.

The practical result is a split. A merchant offering instalments on its own goods may be outside the regime. A financier that funds those instalments, or a platform whose core business is the credit, is inside it. Our article on exemptions from the 2026 Regulations sets out the full list and the incidental credit analysis.

Operating Rules That Shape the Product

Once a provider is licensed or registered, several rules bear directly on how these products are built:

• No hidden charges. A provider may not recover charges that were not disclosed in the contract signed and given to the customer at the point of contracting, and CBK may direct refunds of money recovered in excess or in undisclosed charges (regulation 30).
• Prohibited activities. Regulation 18(1) bars deposit taking, taking cash as security for loans, savings and investment accounts, collection of registration or membership fees from loan applicants, money pools for fundraising, payment services and transfer of funds, dealing in foreign exchange and loans in foreign currencies. A wallet-style product that holds customer balances or collects an upfront membership fee needs to be checked against that list.
• No tied products. A provider may not require a customer to take up deposit-type products, cash security, savings accounts or membership fee arrangements from its associates as a condition of getting a loan (regulation 18(4)).
• Security and repossession. Recovery of security over land must follow Part IX of the Land Act, and recovery of movable security must follow the Movable Properties Securities Rights Act, with a thirty-day notice before sale of a borrower’s property (regulation 30). Pay as you go providers that deactivate or repossess assets should map their contracts against this.
• Outsourcing the channel. A merchant or platform that originates loans is often a third-party service provider. The provider may not outsource the final decision to grant loans or management of the loan portfolio, remains liable for the service provider’s acts, must notify CBK at least thirty days before the arrangement and must secure CBK’s right of access to the service provider’s records and systems (regulation 31).

Licence or Registration, and by When

A business with initial capital of KES 20 million or more must apply for a licence; below that it applies for registration, and a registered provider whose capital, borrowings or loan book exceeds KES 20 million must convert. A business already doing buy now pay later, asset finance or pay as you go on 29 September 2026 must apply by 29 March 2027 (regulation 96(1)). Our articles on the licence or registration test and the March 2027 deadline cover both points. For solar and other asset-linked models, see our note on pay as you go solar and consumer credit law.

Structuring Around the Rules

Retailers and fintech partners usually choose between three structures: the merchant lends from its own balance sheet and relies on the incidental credit exclusion, a separate licensed or registered financier funds the instalments, or the platform becomes the licensed lender itself. The right choice depends on how central the credit is to the revenue model, who carries the credit risk and who owns the customer relationship. A merchant that outgrows the incidental credit exclusion without applying has no transitional cover after the deadline.

Frequently asked questions

This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.