The Microfinance Bill, 2026
Status Timeline
Proposed
Active now
Public Review
Pending
Debate
Pending
Executive
Pending
Final
Pending
New KSh 250 Million Capital Requirement
Under the First Schedule, every microfinance institution must maintain:
- A core capital of at least KSh 250 million to be realized within five years of the Act's commencement.
- A core capital of not less than 10% of total risk-adjusted assets plus risk-adjusted off-balance sheet items.
- A total capital of not less than 12% of its total risk-adjusted assets plus risk-adjusted off-balance sheet items.
Interest Recoverable on Defaulted Loans Capped
Clause 56 introduces an "in-duplum" style cap for non-performing loans. The maximum amount recoverable from a debtor is limited to:
- The principal owing when the loan became non-performing.
- Interest, not exceeding the principal owing when the loan became non-performing.
- Reasonable expenses incurred in the recovery of any amounts owed by the debtor.
Cash Collateral Banned for Non-Deposit Takers
Clause 58 prohibits any person conducting a non-deposit-taking business from accepting any form of deposit or cash collateral from customers. Non-compliance is an offence carrying a fine of up to KSh 5 million, imprisonment for up to three years, or both.
Stricter Governance and CBK Vetting Rules
Part IV (Clauses 23-25) introduces tight corporate governance requirements:
- Every institution must have a board of at least five directors.
- Three-fifths of the board must be non-executive directors, and at least one-third must be independent non-executive directors.
- The board must be chaired by an independent non-executive director.
- All directors must be vetted and approved as fit and proper by the Central Bank of Kenya (CBK) before assuming office.
Bill No.
No. 9 of 2026
Gazette No.
Supplement No. 54 of 2026
Sponsor
Kimani Ichung'wah
Background
The Microfinance Bill, 2026, aims to repeal and replace the Microfinance Act, Cap. 493C. The objective is to modernize the legal framework governing microfinance institutions, ensuring a safe, stable, and solvent microfinance sector under the regulatory oversight of the Central Bank of Kenya (CBK).
Key Amendments
- Repeal of Cap. 493C: The Bill completely repeals the existing Microfinance Act, Cap. 493C (Clause 63), transitioning existing licensed microfinance banks to the new regime.
- CBK Regulatory Power: The Central Bank of Kenya is granted expanded supervision, inspection, and enforcement powers over both deposit-taking and specified non-deposit-taking microfinance businesses.
- Consolidated Supervision: CBK is empowered to conduct consolidated supervision of microfinance groups, holding companies, and their affiliates.
New Obligations
- Licensing Requirements: Carrying out microfinance bank business without a license is strictly prohibited (Clause 4). Applications must be made to the CBK with prescribed fees and documents.
- Ownership Limits: No single person may hold more than 25% of the share capital of an institution directly or indirectly, unless they are an exempt entity such as another financial institution, the Government of Kenya, or an approved non-operating holding company (Clause 11).
- Insider Lending Restrictions: Institutions are prohibited from granting loans or credit facilities to officers, staff, or their associates in excess of limits prescribed by the CBK (Clause 21).
- Accounts and Audit: Financial statements must be prepared in Kenya Shillings and comply with International Financial Reporting Standards (IFRS) and the Companies Act. Audited statements must be submitted to the CBK within three months of the financial year-end and published in a widely circulating newspaper (Clauses 28-33).
- Consumer Protection Measures: Under Clause 47, institutions must implement measures ensuring transparency of services, safe and reliable services, fair treatment, and prompt resolution of consumer complaints.
Penalties
- Unlicensed Operations: Operating without a license carries a fine not exceeding KSh 5 million, imprisonment for up to three years, or both (Clause 4).
- Obstruction of Inspection: Refusing or failing to provide documents or access to CBK inspectors carries a fine of up to KSh 10 million, imprisonment for up to five years, or both (Clause 38).
- Insider Lending Violations: Contravention of insider lending rules carries a fine not exceeding KSh 5 million, imprisonment for up to five years, or both (Clause 21).
- Monetary Penalties by CBK: The CBK may directly impose monetary penalties for general non-compliance with the Act or regulations, capped at KSh 1 million for institutions and KSh 100,000 for natural persons, with daily penalties up to KSh 10,000 for continuing violations (Clause 60).
Transitional Provisions
- Licence Continuity: Any institution licensed under the repealed Microfinance Act (Cap. 493C) at the commencement of this Act shall have its license deemed valid as if granted under the new Act (Clause 63).
- Validation of Actions: Anything lawfully commenced, done, or executed under the repealed Act remains valid and continues under this Act.
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