Fintech Credit in Kenya: The Case for Strategic Regulation

The study sought to present the case for strategic regulation in the Fintech Sector, specifically in digital credit, with reference to Kenya. This was based on the concern that the proposed regulation on Fintech Credit by the Kenyan Parliament and the Government of Kenya does not factor in the sustainability aspects of Fintech Credit businesses. The study is anchored on the Public Interest Theory, the Private Interest Theory, and the Economic Theory of Regulation. The study adopted desk research, which depended on the review and examination of primary data sources such as legislation, government policy documents, acts of parliament, and reports. The study sought to achieve its objectives by evaluating the current laws and regulations affecting mobile lending in Kenya. It then relied on a comparison with two jurisdictions, specifically India and USA, where one has an existing mobile lending regulatory framework, and the other has a general regulatory framework respectively. It was established that the proposed regulations have a bias toward consumer protection and do not focus on business sustainability. The study, therefore, concluded that one single regulatory framework or laws will be insufficient for a sector where the laws in place will always be one step behind innovation in Fintech credit, and observed the need for a strategic approach to the regulation of Fintech credit in Kenya. It was recommended that, Fintech credit regulation in Kenya ought to incorporate a degree of flexibility. This flexibility is envisaged by Regtech, which takes care of new product-specific regulations. Secondly, regulators in Kenya should engage in Fintech Credit promotion by creating regulatory sandboxes. Sandboxes allow innovators to test their concepts in a deregulated environment that the rest of the market does not enjoy.