The Business Laws (Amendment) Bill, 2024 (the Bill) was recently tabled in the National Assembly. It proposes several changes that will affect the banking and financial sector.
These changes include:
- Penalties: The Bill proposes to update the penalties for non-compliance applicable to financial institutions, credit reference bureaus and other persons (including corporates and individuals). One of the penalties it seeks to introduce for financial institutions and credit reference bureaus is an amount equal to three times the gross amount of the monetary gain made or loss avoided by the failure or refusal to comply.
- Core capital: The Bill proposes a gradual increase in banks’ and mortgage finance companies’ core capital to KES 10 billion by the end of the year 2027. This is likely to result in mergers and acquisitions of smaller banks.
- Regulations of credit business: The Bill proposes to bring all credit providers under the regulation of the Central Bank of Kenya. Credit providers are defined to include persons undertaking the business of:
- ‘buy now pay later’ arrangements;
- peer-to-peer lending under collective investment schemes;
- credit guarantee business;
- asset financing; and
- ‘granting of credit facilities to members of the public, with or without interest, and either secured or unsecured’
- Regulation of non-deposit-taking microfinance companies: The Bill proposes to regulate entities undertaking non-deposit-taking microfinance business. Non-deposit-taking microfinance business has been defined to include the business of providing physical credit (that is, the provision of credit where a lender takes movable or immovable security but does not include acceptance of cash collateral). The Bill proposes a six-month transition period for persons currently undertaking non-deposit-taking microfinance businesses to comply with the new provisions.
- Credit guarantee businesses: The Bill seeks to regulate credit guarantee businesses. The credit guarantee business is defined to include the business of providing a guarantee to a lender for absorption of the lender’s risk on a credit facility to a borrower. The Bill exempts foreign credit guarantee providers who are owned by foreign governments or by foreign financial institutions, which have entered into agreements with the Government of Kenya; and foreign credit guarantee providers who partner with local financial institutions to provide credit guarantee services. It proposes a five-year transition period.
The Bill is still undergoing the enactment process at the National Assembly. Businesses that are likely to be affected by the proposed changes are encouraged to participate by providing comments and lobbying for any necessary changes; and prepare to comply if the Bill is enacted into law. Bowmans remains available to offer further guidance on the proposed amendments and their impact on your business.
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