Executive summary

Parliament approved and the President signed into law on 11 December 2024 the Business Laws (Amendment) Bill 2024 (the Bill). The Bill aimed to amend several key business legislations including: the Banking Act, Chapter 488, Laws of Kenya; the Central Bank of Kenya Act, Chapter 491, Laws of Kenya; the Microfinance Act, Chapter 493C, Laws of Kenya; the Standards Act, Chapter 496, Laws of Kenya, the Special Economic Zones Act, Chapter 517A, Laws of Kenya; and the Kenya Accreditation Service Act.

The commencement date of the Business Laws (Amendment) Act, 2024 (the Act) was 27 December 2024.

Detailed discussion

The Act introduces a broad range of legislative changes that seek to enhance the regulatory framework of various bodies.

Some of the key amendments are highlighted below.

Banking Act

Increased penalties for noncompliance. The Act increases the maximum penalty for noncompliance by financial institutions and credit reference bureaus with the Banking Act, the Prudential Guidelines or any direction issued by the Central Bank of Kenya, from 5m Kenyan shilling (KES) to KES 20m or three times the gross amount of the monetary gain made, or loss avoided by the failure or refusal to comply, whichever is higher.

Similarly, the penalty for individual noncompliance has been increased from a maximum of KES 200k to KES 1m, while for corporate entities, the penalty has been established at KES 3m.

The Act also provides for enactment of regulations by the Central Bank of Kenya that provide for a daily penalty of up to KES 100k for continued noncompliance. This is an increase from the previous penalty of KES 20k.

Increase in core capital requirement. The core capital requirement for banks and mortgage finance companies has increased from KES 250m to KES 10b over a staggered six-year period. A transition plan from 31 December 2024 to 31 December 2029 has been provided to allow institutions to comply with the higher capital requirement.

Central Bank of Kenya Act

Broadening of regulated businesses and institutions. The Central Bank of Kenya Act has been amended to encompass all types of non-deposit-taking credit providers, extending beyond those offering digital credit. This includes services such as buy now pay later, peer-to-peer lending and asset financing, which will now be regulated by the Central Bank of Kenya.

Regulation of non-deposit-taking credit providers. All entities offering credit services without accepting deposits are now required to obtain a license from the Central Bank of Kenya. Non-deposit-taking businesses will now be required to align all aspects of their businesses including their credit pricing models with regulations from the Central Bank of Kenya.

Regulation of credit guarantee businesses. The Act has introduced a provision that will govern the establishment, registration, licensing and exemption requirements for companies wishing to engage in credit guarantee activities.

Persons carrying out credit guarantee business are now required to be registered with the Central Bank of Kenya and to comply with any guidelines or directives issued by the Central Bank of Kenya, including on capital adequacy.

Any individual who is required to register but fails to do so will be subject to a penalty not exceeding KES 1m or imprisonment term of three years or to both. Corporate entities that fail to comply with the registration requirement face a fine of up to KES 10m.

Existing credit-guarantee businesses are required to apply for registration and a license within five years after the commencement of the Act.

Microfinance Act

Nature of non-deposit-taking microfinance business. The definition of non-deposit-taking microfinance business has been updated to specify that it involves the provision of credit secured by physical collateral (movable or immovable security), rather than cash.

Registration and licensing of non-deposit-taking microfinance businesses. A new section, 4A, has been inserted to outline the operational requirements. A non-deposit-taking microfinance business is a company that is registered under the Companies Act to carry out non-deposit-taking microfinance business and is licensed under the Microfinance Act.

Existing non-deposit-taking microfinance businesses are required to obtain a license from the Central Bank of Kenya within six months from the commencement of the Act.

Licenses that had been issued prior to the enactment of the Act will continue in force until the expiry of the license. These existing businesses are also allowed to continue conducting their businesses as they wait for the approval of their license application.

Noncompliance with licensing requirements for new non-deposit-taking microfinance businesses is an offense that carries a penalty of a KES 100k fine or a prison term of three years, or both.

Exemptions. The Cabinet Secretary is empowered to promulgate regulations regarding the exemption of certain non-deposit-taking microfinance businesses from the application of the Act. However, exemptions will not be granted to businesses with annual revenues exceeding KES 500k.

Consumer protection measures. The Act has established consumer protection measures to which non-deposit-taking microfinance businesses must adhere. For instance, they are prohibited from harassing, abusing or oppressing borrowers, guarantors or any person during collection or recovery of a debt.

Standards Act

Standards for manufacturers. Section 10D has been inserted to stipulate that manufacturers must ensure their products are produced in accordance with the Standards Act. Additionally, manufacturers must conduct sample testing of each product prior to market release, meet prescribed labeling requirements, and implement procedures to ensure product traceability from the factory to the consumer.

Bureau laboratories. The Kenya Bureau of Standards has been authorized to establish laboratories, which shall be accredited by the Kenya Accreditation Service. These laboratories will be responsible for developing test methods, providing proficiency testing services, issuing testing and measurement certificates, and issuing test certificates, among other functions.

Calibration facilities. The Kenya Bureau of Standards will receive accreditation from the Kenya Accreditation Service to offer calibration services in Kenya, either independently or through designated laboratories. It has also been granted the authority to license and register competent accredited bodies to provide calibration services where necessary.

Special Economic Zones Act

Minimum investment amount. The Cabinet Secretary has been empowered to set the minimum amount to be invested in an area declared as a special economic zone, based on recommendation of the Special Economic Zones Authority.

Duration of incentives. The benefits granted to a special economic zone developer, operator or enterprise will now be limited to a period of 10 years from the date of issuance of the license. Previously, some of the incentives did not have a time limit.

Special Economic Zones business service permit. The Special Economic Zones Act has been amended to introduce a new permit, referred to as the Special Economic Zones service permit. This permit applies to individuals or entities providing services within the Special Economic Zone for which no incentives or benefits are conferred under the Act.

Kenya Accreditation Service Act

Accreditation of foreign conformity assessment bodies. Any foreign conformity assessment body conducting conformity assessments in Kenya must be accredited by the service body. Additionally, any foreign conformity assessment body seeking accreditation from, or already accredited by, a foreign accreditation body is required to obtain an exemption from the Kenya Accreditation Service. The exemption or accreditation must be obtained within three months of the commencement of the Act.

Next steps

Businesses should review and assess the impact of the various legislative changes on their businesses. They should also make the necessary changes within the stipulated timelines.