Legal Alert: Control Of Hire Purchase Business And Bnpl Models In Kenya

Kenya is considering significant reforms to regulate hire purchase agreements and Buy Now, Pay Later (BNPL) models, enhancing consumer protection and transparency. 

Proposed Amendments: 

1. Central Bank of Kenya (CBK) Regulation: The CBK will be empowered to regulate borrowing costs for hire purchase agreements, expanding its authority beyond banks and digital lenders. This is part of proposed changes to the Movable Property Security Rights Act, replacing the outdated Hire Purchase Act. 
2. Licensing and Oversight: While the CBK will set interest rates, the Business Registration Service (BRS) will continue to issue licenses and set operational conditions. The Treasury Cabinet Secretary will create regulations for licensing these businesses. 

These changes respond to the growing trend of purchasing goods on credit, fueled by technological advancements. Key players like Pay Later, M-Kopa, Aspira, Watu, Flexpay, and Safaricom’s Faraja have capitalised on BNPL models, often impacting young and low-income Kenyans with high fees and interest rates. 

The government aims to establish a more regulated and transparent environment for credit purchases, addressing concerns about exploitative lending practices in the BNPL market, particularly affecting sectors such as bodaboda riders. 

These amendments represent a significant shift in regulating hire purchase and BNPL models in Kenya, aiming to curb exploitative practices and ensure fairer lending terms for consumers. Financial and retail sector stakeholders should prepare for these changes and adjust their practices accordingly.