Pay-As-You-Go Solar in Kenya: Where Energy Regulation Meets Consumer Credit Law

Pay-as-you-go solar, where a customer takes a solar kit home and pays it off in small instalments, often by mobile money, sits at the intersection of two regulatory regimes that most solar companies think about separately, if at all. Getting the legal structure of the instalment plan wrong can mean an unlicensed credit business on one side or an unlicensed hire-purchase business on the other, quite apart from the Solar PV Regulations licensing we cover in our companion guide to licensing for solar installers and contractors.

Two Ways to Structure the Instalment Plan

Most pay-as-you-go solar arrangements take one of two legal shapes, and the shape chosen decides which regulator gets involved. In the first, the customer takes possession of the solar kit immediately, uses it while paying instalments, and title passes to them once the price is fully paid, or they may hand the unit back at any point instead. This is a hire-purchase agreement in substance, whatever the marketing materials call it. In the second, a lender advances credit that the customer uses to buy the system outright, with ownership passing to the customer from day one and a separate loan being repaid over time. The two structures look similar to a customer topping up their account by mobile money each month, but they sit under different Kenyan statutes.

When It Is a Hire-Purchase Agreement

Section 2(1) of the Hire-Purchase Act defines a hire-purchase agreement as one for the bailment of goods under which the bailee, the customer, may buy the goods or under which the property in the goods will or may pass to them. A pay-as-you-go solar kit that the customer possesses and uses while paying instalments, with ownership transferring on full payment, fits this definition. Section 18(1) then requires anyone carrying on hire-purchase business to hold a current licence (the requirement runs from an “appointed day” that the Cabinet Secretary fixes by Gazette notice, which should be confirmed), granted by a licensing officer appointed by the Cabinet Secretary under section 19, and section 18(2) makes carrying on unlicensed hire-purchase business an offence carrying a fine of up to KES 200,000, imprisonment of up to one year, or both.

The Act’s substantive consumer protections, the implied conditions and warranties in section 8, and the rules on removal of goods and on recovery of possession once two-thirds of the price is paid (sections 9 to 15), apply to agreements with a hire-purchase price of up to KES 4,000,000 where the hirer is an individual; section 3(1) excludes any agreement where the hirer is a body corporate from these protections regardless of price. The same section 3(1), however, expressly states that this price and corporate-hirer limitation does not affect the definition of “hire-purchase business” in section 2(1). In practice this means the licensing requirement in section 18 is tied to carrying on the business of entering into hire-purchase agreements at all, and should be treated as applying to a pay-as-you-go solar company regardless of whether a particular customer’s deal falls inside or outside the price threshold.

When Pay-as-You-Go Solar Is Credit Instead

A structure where a separate financing arm lends the purchase price so the customer owns the system outright from the start looks more like a loan than a hire-purchase agreement, since there is no bailment and no property that “will or may pass” over time, it has already passed. Whether this needs a licence from the Central Bank turns on the Central Bank of Kenya (Non-Deposit Taking Credit Providers) Regulations, 2026, which revoked the 2022 Digital Credit Providers Regulations. Regulation 3(3)(f) excludes credit that is merely incidental to the sale of goods or services by a person whose primary business is providing those goods or services, and regulation 3(3)(h) excludes hire-purchase arrangements involving bailment of goods under the Hire-Purchase Act. A solar retailer offering instalment credit as a feature of selling its own systems, where credit is the incidental piece and hardware sales are the business, has a real argument for sitting inside the first exclusion. A dedicated financing subsidiary whose primary business is the lending itself sits on much weaker ground.

The 2026 Regulations also define “pay as you go” as a credit arrangement in which the consumer gains use of an asset through partial or periodic payments with the ultimate intention to own it, and the provider keeps the right to restrict, deactivate or repossess the asset on non-payment. Regulation 17(1)(f) lists pay as you go arrangements, as determined by the Central Bank, among the activities a licensed credit provider may carry on. A kit that the provider can lock remotely therefore sits close to the Central Bank’s own definition, so check the Bank’s position on such arrangements before launch.

Why the Distinction Is Not Just Theoretical

The two licensing regimes are administered by entirely different authorities, with different applications, different fees, and different ongoing obligations, and neither substitutes for the other. A company licensed under the Solar PV Regulations to sell and install systems is not thereby licensed to run a hire-purchase business or a credit business under the 2026 Regulations; those are separate applications under separate statutes. Structuring the customer contract carefully at the outset, choosing deliberately between a genuine hire-purchase agreement and a genuine loan, rather than drafting something that blurs the two, is what decides which licence, if either, is actually required, and doing this analysis before signing customers rather than after a regulator asks the question is considerably cheaper.

Frequently asked questions

Do we need a hire-purchase licence if our average deal is well under KES 4,000,000?
Likely yes. The KES 4,000,000 figure limits which agreements get the Act’s consumer-protection provisions, not whether the licensing requirement in section 18 applies to the business itself.

Can we avoid both licences by calling the arrangement a “subscription” instead?
No. Regulators and courts look at the substance of the arrangement, whether the customer possesses the goods while paying and eventually owns them, or borrows money to buy them outright, rather than the label used in marketing.

If our finance arm is a separate company from our solar retail company, does that change the analysis?
It can, and often not in the direction companies expect. A standalone finance subsidiary is less likely to qualify for the “incidental to the sale of goods” exclusion in regulation 3(3)(f) of the 2026 Regulations, because its own primary business is genuinely credit rather than solar equipment.

What is the penalty for running an unlicensed hire-purchase business?
A fine of up to KES 200,000, imprisonment of up to one year, or both, under section 18(2) of the Hire-Purchase Act, in addition to any exposure under the Solar PV Regulations if the underlying solar licensing is also missing.

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.