What happened

In recent weeks Kenyan lawmakers have publicly called on the Central Bank of Kenya (CBK) to intervene in the buy‑now‑pay‑later (BNPL) market. The demand was voiced during parliamentary committee hearings where several members warned that the rapid rise of BNPL services could expose consumers to unsustainable debt. Lawmakers highlighted that many Kenyans, especially younger users, are signing up for short‑term credit without fully understanding repayment obligations. The push for regulatory action follows reports of delayed payments and rising arrears among users of mobile‑money linked BNPL platforms. MPs are now urging the CBK to draft clear guidelines that protect borrowers while allowing responsible fintech innovation to continue.

Context and background

The BNPL model entered Kenya in 2020, leveraging the country’s high mobile‑money penetration and the popularity of platforms such as M‑Pesa, Safaricom’s KCB M‑Pay, and fintech start‑ups that offer instant credit at checkout. Since then, the sector has expanded quickly, with several providers reporting double‑digit growth in user numbers each quarter. While the convenience of “pay later” has attracted many first‑time borrowers, consumer‑rights groups have raised concerns about opaque fee structures and limited disclosure of interest rates. The lack of a dedicated regulatory framework means that BNPL firms operate under the broader financial services rules, which were not designed for this type of micro‑credit.

Parliamentary oversight of the financial sector intensified after the CBK’s 2022 directive on digital credit, which sought to tighten rules on short‑term loans but left a gap for BNPL products. In response, the Senate Finance Committee invited representatives from the CBK, the Capital Markets Authority, and several BNPL providers to testify. During those hearings, MPs such as Hon. David Mwaure and Hon. Grace Muthama warned that unchecked growth could erode consumer confidence and increase default rates, especially among low‑income earners. The CBK has acknowledged the issue, stating that it is reviewing the sector’s risk profile and will consider “targeted supervisory measures” in the coming months.

Historically, Kenya’s financial inclusion agenda has been praised for its innovative mobile‑money ecosystem, but the rise of BNPL introduces a new layer of credit exposure. The World Bank notes that while Kenya’s overall credit to the private sector remains modest, the share of digital micro‑loans has risen sharply, signalling a shift in borrowing behaviour. This shift has prompted the Ministry of Finance to commission a study on the socio‑economic impact of BNPL, aiming to inform any future legislative amendments. The study, still pending publication, is expected to provide data on repayment timelines, default rates, and the demographic profile of BNPL users.

Compared with what is normal

Traditional micro‑finance loans in Kenya typically carry repayment periods of three to six months, with interest rates ranging between 15 % and 30 % per annum. In contrast, BNPL transactions often require repayment within 30 to 90 days, but many providers embed hidden fees that can push the effective cost of credit well above conventional micro‑finance rates. Seasonal borrowing patterns also differ: while agricultural loan demand peaks during planting seasons, BNPL usage spikes around urban retail events such as “Black Friday” sales and the festive period in December. This means that the debt burden can accumulate at times when household cash flow is already strained.

  • Typical micro‑finance loan: 3‑6 months, 15‑30 % APR.
  • BNPL repayment window: 30‑90 days, effective cost often >30 % APR.
  • Peak BNPL activity: urban retail events, end‑of‑year holidays.
  • Seasonal micro‑finance demand: planting/harvest cycles.
Why it matters

For Kenyan SMEs, the BNPL model presents both an opportunity and a risk. Retailers that partner with BNPL providers can boost sales by offering flexible payment options, especially to younger consumers who prefer digital transactions. However, if the underlying credit risk is not managed, merchants may face higher charge‑back rates when borrowers default, potentially eroding profit margins. For individual consumers, the allure of instant credit can lead to a cycle of repayments that strain household budgets, particularly when multiple BNPL accounts are held simultaneously. Unchecked, this could translate into higher non‑performing loan ratios that affect the broader financial system’s stability. Moreover, the absence of clear regulatory guidance leaves both lenders and borrowers vulnerable to disputes over fees and repayment terms.

Practical steps
  • Review the terms of any BNPL agreement carefully; look for hidden fees, interest rates, and repayment schedules before committing.
  • Track all BNPL obligations in a single ledger or budgeting app to avoid overlapping payment deadlines.
  • If you are a retailer, negotiate clear merchant‑level contracts that limit charge‑back exposure and set transparent settlement periods.
  • Consider diversifying financing sources; traditional short‑term loans or supplier credit may offer more predictable costs.
  • Stay informed about upcoming CBK guidelines by following announcements from the Central Bank’s official communications channels.

Financial Management & Analysis services at Beavoren Ventures can help SMEs assess the true cost of BNPL arrangements, integrate credit monitoring into their accounting systems, and prepare for any regulatory changes that may affect cash flow management.

Book a consultation with Beavoren Ventures today and let us handle your compliance, books, and advisory in one place.

Disclaimer: This article is informational and does not constitute formal tax, audit or legal advice. For guidance specific to your circumstances, please contact Beavoren Ventures.