Sources of Banking Laws in Kenya

IV. The Microfinance Act of 2006 regulates the licensing, regulation and supervision of microfinance operations. Most regulated institutions provide banking services and are subject to the Central Bank and the Kenya Deposit Insurance Corporation. Notwithstanding the provisions of this Article, the Central Bank may, under such conditions or restrictions as it may prescribe, permit an institution to provide to its overseas customers through banking institutions outside Kenya, as it may determine on a case-by-case basis. As a regulator, the CBK has put in place a risk-based surveillance framework designed to address the sector`s problems at their roots rather than by their symptoms. This approach requires a systematic review of banking institutions and their processes and procedures on an ongoing basis and requires a collaborative regulatory approach. This framework has resulted in a new wave of monitoring and risk management guidelines, which are discussed in more detail below. With 38 banks, nine representative offices of foreign banks and 14 licensed microfinance institutions[i] at the end of the 2020/2021 financial year, it is clear that Kenya`s banking sector is well developed and characterized by innovative services and products. The sector has been remarkably resilient over the past year, even as its risk landscape continues to be impacted by the COVID-19 pandemic. So far, it has been able to defy the negative economic shock and, interestingly, continue its growth trajectory. `additional capital` means general provisions held against future losses and currently not identified freely available to cover subsequent losses, revaluation provisions in bank buildings arising periodically from the independent valuation of such premises, as well as any other form of capital which may be determined from time to time by the central bank; Driven by the recently released State of Climate in Africa 2020 report, which highlighted the devastating effects of climate change on the economy, particularly the banking sector, the CBK released its guidelines on climate-related risk management for the banking sector on 15 October 2021. The main objective of the guidelines is to help banks integrate climate-related risks into their governance, strategy, risk management and disclosure frameworks.

This is the latest step in the banking sector`s efforts to make the system greener. Other examples include when Acorn Group Limited issued and listed the first green bond in East and Central Africa in January 2020 and where the United Nations Green Climate Fund recognized KCB Bank as the first financial intermediary in the conduct of green finance in East Africa in November 2020. [xix] Development Finance Institutions (DFIs), commercial banks, private equity firms, and high net worth individuals are among the most popular sources of financing, particularly debt, which is used for creditors to pursue lending in the digital space. require changes to the legal or management structure of a banking group or group if it finds that those structures, in their current form, constitute an obstacle to the exercise of the central bank`s supervisory tasks; and This new approach has presented new challenges for the legal sector. Not only has this blurred traditionally distinct and independent regulatory areas, but it has also created overlap between multiple departments and agencies, further complicating oversight of service providers. For example, with M-Pesa, the CBK clearly had a legal mandate to regulate Safaricom`s payment services. However, in order for Safaricom to operate as a telecommunications service provider, it had to obtain a licence issued by the certification authority. This presented an unusual situation between the two agencies, especially in the clear definition of their responsibilities vis-à-vis a mobile money provider.

As a result, legislators were forced to review existing laws and adapt them to consumer protection and to assign clear responsibility. Over time, however, there has been a concerted effort among the various regulators to streamline this. Currently, there are clear roles between those of the CBK and the CA in terms of supervising mobile money service providers. Given the interconnectedness of the banking sector and the dependence of the domestic (and global) economy on banks, it is important that regulators retain control over the standardized practices of these institutions. The objectives of these regulations are to: Digital credit providers (DCPs) in Kenya must disclose and demonstrate their sources of funding after a law regulating the sector comes into force.


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