The Government has intensified efforts to clean up Kenya’s fast-growing digital credit market, with the National Treasury unveiling sweeping policy and regulatory measures aimed at protecting borrowers from exploitation and curbing predatory lending practices.
Appearing before the Senate, Cabinet Secretary for the National Treasury and Economic Planning John Mbadi outlined the reforms while responding to concerns raised by Kisumu Senator Tom Ojienda, through Bungoma Senator Wafula Wakoli.
CBK Tightens Licensing of Digital Lenders
At the heart of the crackdown is a strengthened licensing and oversight framework spearheaded by the Central Bank of Kenya (CBK). All Non-Deposit Taking Credit Providers (NDTCPs), previously known as Digital Credit Providers, are now required to obtain formal licensing under a rigorous regulatory regime.
The framework outlines strict eligibility criteria, governance standards, operational requirements and consumer protection obligations designed to restore order and credibility in the sector.
“These measures are intended to enforce compliance with the law, safeguard customers’ interests and prevent rogue institutions from infringing on consumer rights,” Mbadi told Senate
Stricter Data Protection Enforcement
In a significant boost to borrower privacy, the CBK is working closely with the Office of the Data Protection Commissioner to ensure digital lenders comply fully with the Data Protection Act.
Under the new requirements, all licensed NDTCPs must secure certification under Section 19 of the Act from the ODPC before receiving approval to operate. They must also implement comprehensive data protection policies detailing how personal data is collected, processed, stored and safeguarded in line with lawful and transparent standards
According to Mbadi, the licensing regime has already helped curb excessive interest rates and unethical debt recovery tactics by filtering out non-compliant operators.
Digital Lending Sector Snapshot
Mbadi revealed that 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.
These institutions operate under the Banking Act, Microfinance Act and the CBK Act, which collectively govern entry into and conduct within the financial sector.
As of December 2025, credit to the private sector stood at KSh 4.37 trillion from commercial banks, KSh 32.7 billion from microfinance banks and KSh 110.5 billion from digital credit providers. This translates to 96.8 per cent, 0.8 per cent and 2.4 per cent respectively of total credit advanced by these institutions.
Poverty Reduction and Economic Stimulus Measures
In a separate response to Prof. Ojienda, Mbadi updated the Senate on the progress of economic and social interventions aimed at tackling poverty and easing household pressures.
He noted that successive Medium-Term Plans have prioritised both direct social transfers and indirect economic stimulus measures. One key intervention has been the reduction of interest rates to improve access to credit for small and medium-sized enterprises and households.
In December 2024, the CBK lowered its benchmark rate from 13.0 per cent to 11.25 per cent, triggering a 1.4 per cent rise in credit advanced by commercial banks and non-bank financial institutions to KSh 7.14 trillion, according to the Economic Survey 2025.
Gains in Education and Social Sectors
Mbadi highlighted steady growth in secondary school enrolment as evidence of progress in the social sector. Learner numbers increased from 3.26 million in 2019 to 4.32 million in 2024, reflecting improved transition rates and expanded government investment in capitation grants, infrastructure and retention programmes.
Counties Most Affected by Poverty
Citing findings from the 2022 Kenya Continuous Household Survey, Mbadi said the national poverty rate stands at 39.8 per cent, with 22 counties recording levels above the national average.
Counties such as Turkana, Mandera, Samburu, Garissa, Tana River, Marsabit, Wajir, West Pokot, Kitui, Isiolo, Elgeyo Marakwet, Busia and Kwale have poverty rates exceeding 50 per cent, underscoring deep regional disparities.
Despite the challenges, the Government remains committed to targeted interventions aimed at uplifting the most vulnerable populations.
Equitable Revenue Sharing and Targeted Support
Through the Equitable Share Allocation Formula guided by the Commission on Revenue Allocation, revenue distribution among counties factors in poverty levels, population size, land area and fiscal effort to ensure marginalised regions receive enhanced allocations.
Additional measures include conditional grants for health, urban development, road maintenance and basic services, alongside strengthened social protection programmes, food security initiatives in ASAL regions and drought relief interventions.
Enhancing Transparency and Accountability
To address concerns about leakages and misallocation of funds, Mbadi assured Senators that the Government is strengthening beneficiary identification through improved use of national databases, including the Single Registry.
Expanded digital payment systems, periodic beneficiary revalidation, enhanced internal controls and independent audits are being deployed to boost transparency and ensure resources reach intended households.
The CS further emphasised improved inter-agency coordination and stronger grievance redress mechanisms to enable citizens to report exclusion errors or misuse of public funds and receive timely action.
With tighter regulation of digital lenders and renewed focus on poverty reduction, the Government signals a dual strategy: protecting consumers in the credit market while expanding economic opportunity for vulnerable Kenyans.
