A parliamentary committee in Kenya, led by Molo MP Kuria Kimani, is set to scrutinize Buy Now, Pay Later financing firms due to rising concerns over consumer exploitation and high lending fees. The Finance and National Planning Committee plans to convene with the Central Bank of Kenya to assess the adequacy of consumer protection measures in this rapidly growing sector, with a focus on motorcycle asset financing and other instalment-based credit products.
Legislators are seeking detailed disclosures from lenders regarding their practices, including customer registration, licensing, and regulatory compliance. This move follows complaints from borrowers who claim that certain financing arrangements lead to exorbitant repayment costs and unfair treatment when borrowers experience financial hardship. Kimani has cautioned that companies that fail to respond to parliamentary invitations may face consequences under the National Assembly’s Standing Orders, stating that companies “could face action under the National Assembly’s Standing Orders.”
Regulatory Developments and Market Expansion
The Buy Now, Pay Later market in Kenya has seen substantial expansion, driven by the widespread use of mobile money services and increasing adoption of smartphones. Companies such as Lipa Later and M-KOPA operate in this space, offering financing solutions to consumers. However, issues have arisen regarding the clarity of financing terms, additional fees, and debt recovery methods.
In response to these challenges, Kenya has been enhancing its regulatory framework. The Business Laws (Amendment) Act, 2024, has broadened the Central Bank of Kenya’s oversight authority to include non-deposit-taking credit providers, encompassing certain Buy Now, Pay Later and asset financing businesses. The central bank has also established regulations aimed at enhancing supervision of credit providers and bolstering consumer protections.
The parliamentary review will examine whether lenders adequately inform borrowers of their repayment obligations, assess borrowers’ repayment capacity, and adhere to acceptable procedures for recovering financed assets.
The outcome of this parliamentary investigation may lead to more stringent regulatory oversight and stronger enforcement of consumer protection requirements. As Buy Now, Pay Later services provide a vital financing alternative for many Kenyans, policymakers must balance borrower protection with the need to preserve access to credit. The review’s findings could significantly impact the operations of digital lenders and asset financing companies in Kenya’s evolving financial technology sector.