The Central Bank of Kenya (CBK) is reviewing its governing laws to strengthen its oversight of financial technology (fintech) companies, digital banking, and cybersecurity in the banking industry amid a sharp rise in the number of service providers.
The regulator is recruiting a consultant to undertake an intensive legal review of the Central Bank of Kenya Act and the Banking Act, setting the stage for likely changes to the two laws that fundamentally govern it.
With the review, CBK intends to strengthen its mandate over fintechs – many of which currently operate without the regulators’ oversight – and to boost its grip on digital banking and cybersecurity in the sector.
“The objective of this consultancy is to undertake a comprehensive legal review of the Central Bank of Kenya Act (CBK Act) and the Banking Act to ensure alignment with current financial sector developments, international best practices, and Kenya’s evolving regulatory needs,” said the regulator in a tender call for the consultancy.
One of the key objectives of the planned review is “strengthening provisions related to digital banking, fintech regulation, consumer protection, and cybersecurity.”
It is also intended to identify gaps and inconsistencies in the regulations, aligning them with international standards, ensuring compliance with the Kenyan constitution, and providing clarity, efficiency, and adaptability.
Apart from being the monetary authority charged with tackling inflation and money supply, CBK is the regulator of the banking sector, overseeing lending, payments, and microfinance firms in the country.
Currently, CBK oversees the 39 commercial banks, 14 microfinance banks, one mortgage financier, and 195 digital lenders, which it only started regulating in 2022 after a public outcry regarding widespread misconduct.
Other than digital lenders, fintechs offering other services have largely been outside CBK’s purview, except for those that need access to the national payment system, which is a minority of them.
But Kenya is home to several fintechs, mostly startups offering payment, investment, and savings services, but many remain largely unregulated, save for a few that are under different regulators’ sandboxes.
Examples of such fintechs include Chipper Cash, WapiPay, YoguPay, Jumo, Pezesha, Mogo, WorkPay, Pyypl, among others.
The review comes as CBK also prepares to regulate virtual asset service providers, as the recently enacted Virtual Asset Service Providers Act has yet to be implemented by the Cabinet Secretary for Treasury, John Mbadi.
The Act gives CBK the powers to regulate crypto companies that offer payment services, while the Capital Markets Authority will regulate those offering investment and exchange services.
It also comes as banks intensify the use of digital technologies like mobile applications and mobile banking in their core activities, increasing exposure to cyber and credit risks. The regulator seeks to review its legislative framework to expand its ability to oversee the increased use of technology in banking and the resulting risks.
