How to Obtain a Digital Credit Provider (DCP) Licence in Kenya

How to Obtain a Digital Credit Provider (DCP) Licence in Kenya

The Central Bank of Kenya (CBK) introduced the Digital Credit Providers (DCP) regulations last year, mandating all entities offering digital loans to secure a license to operate legally. With recent news of Google removing hundreds of unlicensed digital lending apps from the Play Store, it is now crucial for all DCPs to apply for a Digital Credit Provider License. Google is offering a 45-day grace period for apps that have submitted their license application.

The Digital Credit Provider License has effectively replaced the No Objection Letter previously required for Non-Deposit Taking Microfinance institutions. The CBK publishes a list of all licensed DCPs on its website.

A digital lending license allows a company to legally offer loans through digital platforms, such as websites or mobile apps, in Kenya. In this guide, we’ll walk you through the steps to obtain a digital lending license and provide a checklist to help you stay on track.

Step 1: Understand the Requirements for a Digital Lending License

Before applying, it’s important to familiarize yourself with the CBK’s requirements:

1.1 Legal Status

You must be a registered company in Kenya with a physical office presence.

1.2 Capital Requirements

Clearly outline your company’s shareholding structure and source of funds.

1.3 Corporate Governance

Your company must demonstrate transparent governance. The board and senior management should have the experience to manage a digital lending business.

1.4 Risk Management

Implement strong risk management policies to mitigate the risks involved in digital lending.

1.5 Consumer Protection

Ensure consumer interests are safeguarded by providing transparent loan terms and securing customer data.

1.6 Technology Infrastructure

Your company must have a secure and reliable tech infrastructure to manage loan applications, credit scoring, and disbursements.

Step 2: Prepare Your Application

After reviewing the requirements, the next step is to prepare your application, which should include:

2.1 Business Plan

Provide a detailed business plan covering your company profile, management team, market analysis, risk management, and financial projections.

2.2 Capital Structure

Detail your company’s shareholding structure and funding sources.

2.3 Organizational Structure

Outline your company’s governance framework, including the board of directors and key management.

2.4 Risk Management Plan

Describe the risks your company will face and the strategies to mitigate them.

2.5 Consumer Protection Plan

Detail how you will protect consumer interests and ensure transparency in loan terms and data security.

2.6 Technology Infrastructure Plan

Explain the technology systems supporting your digital lending operations, from loan origination to disbursement.

Step 3: Submit Your Application

Once your application is complete, submit it to the CBK along with the following documents:

3.1 Certificate of Incorporation

Proof of your company’s registration in Kenya.

3.2 Memorandum and Articles of Association

Outline the rules governing your company’s operations.

3.3 Shareholding Structure

Include a detailed description of your company’s ownership.

3.4 Business Plan

A comprehensive business plan that includes company objectives, financial projections, and risk management strategies.

Digital Lending Licence Application Checklist in Kenya:

• Research the regulations for digital lending in Kenya.
• Develop a business plan covering objectives, target market, and financials.
• Register your company with the Registrar of Companies.
• Prepare a license application including governance, risk management, and organizational structure.
• Provide financial statements, projections, and KYC/AML compliance evidence.
• Submit the application to the CBK for review.
• Wait for CBK approval.

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