The Central Bank of Kenya (CBK) on Wednesday announced it has licensed an additional 29 Digital Credit Providers (DCPs), bringing the total number of authorized digital lenders to 281.The move, made under Section 59(2) of the Central Bank of Kenya Act, follows the licensing of 25 providers announced in July.
Since the regulatory framework took effect in March 2022, the CBK has received more than 900 applications and has worked closely with applicants on business models, consumer protection measures, and the fitness and propriety of proposed shareholders, directors and management.
Yet the progressive CBK licensing has left a large pipeline unresolved. More than 600 DCP applications remain pending, creating what industry observers describe as an operational limbo for many fintech startups.
Companies trapped in the backlog must continue paying staff, compliance costs and legal fees while their core lending activities stay legally frozen. International venture capital has largely stayed on the sidelines, as the absence of a CBK license makes it difficult to model a clear path to scale. Dozens of early-stage firms have quietly shut down or relocated to more permissive markets such as Rwanda or Nigeria rather than exhaust remaining seed capital in Kenya.
At the same time, app-store restrictions have forced a sharp shift in how digital lenders reach customers. Following the CBK’s regulatory crackdowns, Google and Apple purged hundreds of unlicensed or non-compliant mobile lending apps from their platforms.
Many surviving operators pivoted to Unstructured Supplementary Service Data (USSD) channels, securing premium short codes from telecom operators such as Safaricom and Airtel to deliver credit via basic text interfaces on feature phones.
While USSD has helped maintain rural financial inclusion, it comes at a cost. Session fees and network rental charges paid to telcos compress margins and limit the sophisticated data analytics many fintechs once used, pushing them toward simpler, higher-interest products.
A separate legal development has added further pressure. Landmark rulings by the Nairobi Small Claims Court and the High Court of Kenya, including Rei-Iman v Succeed Capital Ltd and cases involving Tri-State Capital and Mombo iCapital, have held that unlicensed lenders lack the legal capacity to enforce loan contracts in court. Judges have declined to examine whether funds were owed and dismissed claims on grounds of statutory illegality.
The decisions have created what analysts call a moral hazard: borrowers increasingly treat loans from unlicensed or still-pending providers as legally void, driving strategic defaults. Billions of shillings in outstanding portfolios have effectively become unenforceable, while asset-backed lenders face difficulties repossessing collateral such as vehicles or smartphones, raising the risk of total principal losses.
The CBK has signaled it will continue its rigorous vetting process.