Licence or Registration? Kenya’s KES 20 Million Lender Test

Every lender that does not take deposits now has to choose a route into the Central Bank of Kenya (CBK) regime: a licence or a certificate of registration. The Central Bank of Kenya (Non-Deposit Taking Credit Providers) Regulations, 2026 (Legal Notice 191 of 2026), which commenced on 29 September 2026, make that choice turn mainly on one number: KES 20 million of initial capital. This article explains how the test works, what each route costs, and when a registered lender is forced across the line into licensing.

Why There Are Two Routes

Section 33S of the Central Bank of Kenya Act prohibits anyone from carrying on non-deposit taking credit business without CBK authorisation, and a person who contravenes it faces imprisonment of up to three years, a fine of up to five million shillings, or both (section 33S(10)). The Act’s definition of non-deposit taking credit business is wide. It covers loans and credit facilities granted to the public “whether or not digitally”, asset financing, buy now pay later arrangements, credit guarantees, pay as you go arrangements and peer to peer lending through collective investment schemes.

Because that net now catches small lenders as well as large digital platforms, the 2026 Regulations create two tiers. Regulation 5 prohibits establishing a non-deposit taking credit business in Kenya, or holding yourself out as carrying one on, unless you are licensed or registered by CBK or already regulated under another written law. Regulation 6 then sets the licensing route and Part III (regulations 9 to 11) sets the registration route.

The KES 20 Million Test

Regulation 6(1) requires a person seeking to establish a non-deposit taking credit business whose initial capital is not less than twenty million shillings to apply for a licence using Form 1. Regulation 9(1) then provides that a person who wishes to carry on the business but fails to meet the conditions set out in regulation 7(1) applies for registration instead, using Form 2. In practice, a business below the KES 20 million capital line will be on the registration route. Note that regulation 7(1) lists the factors CBK weighs when assessing a licence application, so the capital line itself comes from regulation 6(1).

The test looks at initial capital, so the starting point is the money actually invested in the business, not projected turnover. Two practical consequences follow:

• A founder cannot pick the cheaper route by describing the business modestly. Regulation 9(4) makes a person who understates initial capital to meet the registration requirements liable to the penalty in section 33S(10) of the Act, and allows CBK to revoke a registration already granted.
• A business funded mainly by borrowing rather than equity may start as a registered provider but cross the line quickly, because the conversion test (below) also counts borrowings and the size of the loan book.

What Each Route Requires

The document lists are closer than many expect. Both routes require incorporation documents, a certificate issued under section 19 of the Data Protection Act, statements on compliance with Part VII of the Consumer Protection Act and Part VI of the Competition Act, evidence and source of capital, product terms, policies covering credit, data protection, AML/CFT, consumer protection and corporate governance, pricing parameters, business continuity plans, and a certificate of good conduct, tax compliance certificate and credit reference bureau report for each individual significant shareholder, director, chief executive officer and senior officer.

The differences that matter in practice are these:

• Depth of documents. Regulation 6(2) asks licence applicants for full copies of their policies and procedures, a description of operations covering loan sizes, interest rate ranges and loan classification, a statement of how the business will be funded including the debt to equity ratio, ICT security management policies, and a sworn declaration by shareholders that the funds are not proceeds of crime. Regulation 9(3) asks registration applicants for briefs, rather than full copies, of the AML/CFT, data protection, corporate governance and consumer protection policies, although it still requires copies of the credit policy, code of conduct, pricing parameters and business continuity plans. It does not ask for the shareholders’ sworn source-of-funds declaration, the funding and debt to equity statement or the ICT security management policy that regulation 6(2) requires.
• Fit and proper certification. Regulation 14(1) bars anyone from being a significant shareholder, director, chief executive officer or senior officer unless CBK has certified them fit and proper. Regulation 14(9) says paragraphs (1) and (2) do not apply to a registered provider except as CBK may specify case by case, but registration applicants must still file the fit and proper forms (Form 3 and Form 4) under regulation 9(3)(r).
• Decision time. Regulation 7(2) contemplates a licence being granted within sixty days of submission of the application. Regulation 10(1) sets no equivalent period for registration; CBK may grant the certificate once satisfied that the documentation is complete.

Both routes start with CBK approval of the company name under regulation 4, which requires the promoters to propose three names, with a Business Registration Service name search and reservation, details of the proposed shareholders and a high-level business brief. Once CBK approves a name, the promoters obtain a letter of no objection from the Kenya Industrial Property Institute (regulation 4(3)), incorporate within three months and apply for a licence or registration within six months of incorporation (regulation 4(9)).

Fees on Each Route

The Third Schedule sets a non-refundable application fee of KES 100,000 for either route. A licence then costs KES 500,000 on grant and annually; a certificate of registration costs KES 250,000 on grant and annually. Annual fees fall due by 31 December (regulations 7(4) and 10(4)). A provider that pays within three months after 31 December pays double the annual fee (regulations 7(5) and 10(5)), and the Schedule also lists a late penalty fee of KES 1,000,000.

When a Registered Provider Must Convert

Registration is not a permanent status. Regulation 11(1) requires a registered provider to apply for a licence once its capital, its borrowings or its loan book exceeds twenty million shillings. Any one of the three triggers is enough, so a registered lender with modest equity but a growing loan book has to watch the book, not just the balance sheet.

CBK can also force the issue. Under regulation 11(4) it may direct a registered provider to apply for a licence where the provider has failed to disclose the correct amounts, or has undergone a rapid expansion of business following registration. The conversion application under regulation 11(5) must include evidence of capital, details of total borrowings with lenders and interest rates, the loan book, current policies, and a report on complaints received and how they were resolved.

A provider that has applied, or been directed to apply, may keep trading while CBK processes the application (regulation 11(9)). Once the licence issues, CBK gazettes the conversion within thirty days and all licensing obligations apply from then on (regulations 11(7) and (8)).

Choosing the Right Route

For most new entrants the decision follows the capital plan. A well-funded digital lender or asset financier will usually need a licence from the start. A smaller lender can register, but should build its policies and governance to licence standard early, because a successful loan book can trigger conversion within months. Foreign-owned applicants should also plan for the time needed to obtain home-country police clearances and Kenyan tax compliance certificates for every individual in the ownership and management chain.

Our overview of CBK credit provider licensing under the 2026 Regulations covers the wider regime, and our article on phasing regulated activities into a Kenyan company discusses where a lending business sits within a group.

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.