- The Business Laws Bill 2024 seeks to empower the Central Bank of Kenya (CBK) to regulate ‘buy now, pay later’ (BNPL) companies
- BNPL companies like M-Kopa, Loop, and Safaricom enable Kenyans to purchase products in instalments, boosting accessibility
- The bill introduces new definitions for terms such as “non-deposit-taking credit business” and “buy now, pay later”
Elijah Ntongai, a journalist at TUKO.co.ke, has more than three years of financial, business, and technology research and reporting expertise, providing insights into Kenyan and global trends.
The Business Laws Bill 2024 will give the Central Bank of Kenya (CBK) the power to regulate ‘buy now pay later’ (BNPL) companies operating in Kenya.
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BNPL companies have become a mainstay in the Kenyan economy, enabling people to access various products, such as mobile phones, and complete payments in instalments.
Some popular companies providing BNPL services, commonly called ‘lipa mdogo mdogo,’ include M-Kopa, Loop and Safaricom.
What is Business Laws Bill proposing?
The Business Laws Bill has proposed an amendment to section two of the Central Bank of Kenya Act by deleting the definition of “digital channel”, “digital credit”, “digital credit business” and “digital credit provider.”
The deleted definitions will be replaced by a new definition:
” ‘Buy now pay later’ means an arrangement whereby the consumer purchases goods or assets, whether or not secured on the goods or assets, and pays later in instalments with or without interest; ‘credit provider’ includes a non-deposit taking provider.”
The act will also be amended to include the definition of the term “non-deposit-taking credit business” to refer to activities such as granting loans or credit facilities to the public or specific groups, with or without interest, and secured or unsecured on goods or assets purchased.
The term will also refer to asset financing, whether directly or through a third-party financier, “buy now, pay later” arrangements as determined by the CBK, credit guarantees, and peer-to-peer lending under collective investment schemes regulated by the Capital Markets Act.
Regulation of BNPL operations by CBK
According to the Business Laws Bill, all companies or persons seeking to operate a “non-deposit-taking credit business” in Kenya will have to apply for licenses from CBK.
The Business Laws Bill will amend section 33R of the Central Bank Act to empower the Central Bank to register, license, and regulate non-deposit-taking credit providers not governed by other laws and approve channels for conducting such business.
Notably, the amendment will also empower the CBK to determine pricing parameters for these credit companies, supervise these providers as prescribed, and enforce a binding Code of Conduct for their operations.
Additionally, all registered non-deposit-taking credit providers will be subject to supervision, oversight, or monitoring by the bank as deemed necessary.
Tax proposals in Tax Laws and Business Laws bills
Earlier, TUKO.co.ke reported that the National Treasury plans to reintroduce tax measures to boost revenue collection through the Tax Laws Amendment Bill and the Business Laws Amendment Bill.
Proposed tax benefits include increased tax-free meal allowances, higher exemptions for pension contributions, and deductions for SHIF and Housing Levy contributions from taxable income.
The bill introduces a significant economic presence tax, increasing tax rates for non-residents from 1.5% to 3%.
The bill also seeks to remove VAT exemptions on manufacturing-related goods and amend the definition of “digital marketplace” to include specific services.
Proofreading by Mercy Nyambura Guthua, journalist and copy editor at TUKO.co.ke
Source: TUKO.co.ke
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