Appearing before the Senate on Wednesday, Cabinet Secretary for the National Treasury and Economic Planning, John Mbadi detailed the interventions in response to questions raised by Kisumu Senator Tom Ojienda and posed on his behalf by Bungoma Senator Wafula Wakoli.
Among the reforms the CS said, is a strengthened licensing and oversight regime spearheaded by the Central Bank of Kenya (CBK), which now requires all Non-Deposit Taking Credit Providers (NDTCPs) to be licensed under a comprehensive Digital Credit Providers regulatory framework.
The framework spells out strict eligibility criteria, governance standards, operational requirements and consumer protection obligations designed to clean up a sector that has in recent years faced mounting complaints over exorbitant interest rates, data misuse and unethical debt collection tactics.
“These measures have been introduced to ensure compliance with the law and most importantly to safeguard customers’ interests and prevent rogue lending institutions from infringing consumer rights,” CS Mbadi told Senators.
Data Protection Rules
The CS revealed that the CBK is working closely with the Office of the Data Protection Commissioner to enforce uniform data privacy standards across digital lenders.
Under the current framework, all licensed NDTCPs must fully comply with the Data Protection Act and its regulations.
As a pre-licensing requirement, lenders must obtain a certificate under Section 19 of the Act from the data protection authority and develop a comprehensive data protection policy.
“That policy must clearly set out how personal data is collected, processed, stored and protected, and must align with lawful, fair and transparent practices under the Act,” CS Mbadi said.
He noted that the licensing regime has already played a critical role in weeding out non-compliant operators and curbing predatory lending behaviour by ensuring only regulated entities remain in the market.
Lending Market
Providing an update on the structure of the credit market, CS Mbadi said the CBK currently licenses three categories of institutions to lend to the public: 38 commercial banks, 14 microfinance banks and 195 non-deposit-taking credit providers.
Oversight is conducted under the Banking Act, the Microfinance Act and the CBK Act, which govern entry into and conduct within the financial sector.
As of December 2025, credit to the private sector stood at Sh4.37 trillion from commercial banks, Sh32.7 billion from microfinance banks and Sh110.5 billion from digital credit providers.
“This represents 96.8 per cent, 0.8 per cent and 2.4 per cent of total credit advanced by these institutions respectively,” he disclosed.
