Kenya licenses 42 digital lenders: what it means for credit markets in Africa

For decades, formal banking across sub-Saharan Africa was built for a borrower that most people in the region were not. Traditional banks required collateral, formal employment records, and income histories that most working adults in the region could not produce. Mobile technology changed the equation. 

When Safaricom launched M-Pesa in Kenya in 2007, it began as a peer-to-peer transfer tool and became, over the following decade, the foundation of a digital financial system.

By 2024, Kenya’s financial inclusion rate had reached 84.8% of adults, up from 26.7% the year before M-Pesa launched. Once people could store and move money digitally, lenders followed. The model scaled quickly, and it scaled with very little oversight.

On December 30, 2025, the Central Bank of Kenya announced the licensing of 42 additional Digital Credit Providers, pushing the total number of regulated digital lenders to 195. The announcement followed 27 licenses in September 2025 and 41 in June of the same year. 

For most observers, it reads as routine regulatory news. For anyone watching how African credit markets are maturing, it signals something more deliberate: a regulator building a functioning licensed market out of what was, until recently, an industry operating largely on its own terms.

A market that grew faster than anyone could govern

Kenya’s digital lending market did not emerge from a policy plan. It emerged from an infrastructure opportunity. M-Pesa created a payments layer and lenders built credit products on top of it.

M-Pesa now processes roughly 2,600 transactions per second and handled Sh38.3 trillion in the financial year ending March 2025, a volume that exceeds Kenya’s annual GDP.

That scale of digital activity meant lenders could disburse and collect through a network with deep nationwide penetration. The business case was obvious, and entrants arrived in large numbers.

The early years produced serious harm alongside genuine credit access. Some lenders used app permissions to harvest contact lists and threatened to notify borrowers’ employers and family members when repayments fell behind. Others structured fees in ways that made true borrowing costs nearly impossible to calculate upfront.

Kenya ranks among the world’s highest for mobile money penetration, with adoption reaching 91% of adults, which gave lenders unusual reach into borrowers’ social networks.

The CBK introduced a licensing regime in March 2022 in direct response. Since then, it has received more than 800 applications from companies seeking authorization to operate, and has granted just 195 of them. That sub-25% approval rate reflects a regulator filtering for quality, not simply recording participants.

Read more: 5 loan marketing ideas for digital-first lenders

What the CBK’s licensing framework actually measures

Getting a license from the CBK is not as simple as filling out a registration form. Before approving any digital lender, the regulator looks closely at the people behind the business: its shareholders, directors, and senior managers. 

If any of them have a history of financial misconduct in other markets, that raises a red flag and can stop the application from moving forward. The CBK also checks whether the business model actually makes sense, where the money is coming from, and whether the company has clear policies on how it will treat borrowers and handle their data.

Once licensed, lenders have to follow specific rules. They cannot report a borrower to a credit bureau over a debt smaller than Sh1,000, which protects people from having their credit records damaged over a trivial amount. 

They must show borrowers the full cost of a loan before any money changes hands, and their debt collection methods must stay within ethical boundaries. The CBK also runs a channel where the public can report lenders operating without a license, which helps keep the unregulated players in check.

The numbers show this approach is working. By November 2025, licensed digital lenders had given out 6.6 million loans worth KSh 109.8 billion. Business Daily Africa reported that this was nearly double the Sh55 billion recorded in December 2024, which was itself up from Sh28.9 billion in 2023. Playing by the rules has not slowed the market down. It has helped it grow.

195 licensed lenders: opportunity or oversaturation?

Having 195 licensed digital lenders in one market sounds like a win, and in many ways it is. More lenders mean more competition, which can push prices down and encourage better products. But it also raises a question worth asking honestly: is this many lenders serving the same market healthy, or is it too much of a good thing?

The concern is straightforward. Most licensed lenders offer the same basic product, which is short-term personal loans. That means they are largely chasing the same pool of borrowers.

When one borrower can walk away with loans from five, ten, or even more lenders at the same time, the risk of that person borrowing more than they can repay becomes very real.

The bigger problem is that lenders cannot fully see what their competitors are doing. Kenya’s credit bureaus hold records of how borrowers have repaid loans in the past, but they do not show what loans a borrower is carrying right now, today.

By the time that information shows up in the system, a borrower may already be in trouble. So even a responsible lender, following all the rules, can end up lending to someone who is already drowning in debt elsewhere.

This is not a Kenya-only problem. In Nigeria, 521 digital lenders are now registered with the FCCPC, and lenders there have reported the same issue openly. Borrowers owing money to 35 different lenders at the same time is not an extreme edge case; it actually happens.

Credit bureau data in Nigeria can take up to 30 days to reflect a new default, which makes it nearly impossible to catch this kind of problem in real time. More licensed lenders means more credit flowing to people who need it, but it also means more gaps for over-borrowing to slip through.

Read more: FCCPC regulations for digital lenders

The infrastructure gaps regulation cannot close alone

Regulation tells lenders how to behave. It cannot fix the underlying infrastructure that lenders depend on to do their jobs well. Kenya is actually better positioned than most African markets in this regard. Mobile money is widespread, the national identity system works, and credit bureau coverage is relatively broad. But gaps remain, and they affect lending in practical ways.

A large portion of potential borrowers in Kenya earn money informally. They run small businesses, trade in markets, and handle most transactions in cash. These borrowers leave very little financial data behind, which makes it hard for lenders to assess how risky they are. 

Some lenders try to fill this gap using alternative signals like airtime top-up history or phone usage patterns, but these are imperfect. They can tell you something about a person’s habits, but not always whether they will repay a loan.

Fraud is another problem that a license alone cannot solve. Because digital lenders approve borrowers remotely, they are exposed to SIM swap fraud, fake identities, and groups of people who deliberately borrow from multiple lenders with no intention of repaying. Most licensed lenders now use several layers of verification to catch this, but it adds cost and complexity to the onboarding process.

There is also the question of reach. In West Africa’s WAEMU region, 89% of mobile money transactions still happen via USSD, which are basic text-based menus that work on any phone, not just smartphones.

A lender that only offers an app is cutting itself off from a large share of the people who need credit most. Kenya has handled this better than many markets, but it remains a real consideration for any lender thinking about scale.

What Africa’s lenders should take from this

Kenya is ahead of most African markets when it comes to regulating digital lending, but it is far from the only one moving in this direction. Nigeria’s FCCPC introduced new digital lending rules in July 2025, including mandatory registration and heavy fines for violations. 

Ghana has been tightening oversight of mobile lenders through the Bank of Ghana, particularly after complaints about aggressive collection practices.

In South Africa, the National Credit Regulator has stepped up enforcement against lenders who obscure pricing or ignore affordability checks. Tanzania and Uganda are both in the process of building clearer frameworks for digital credit providers operating within their borders.

What these markets have in common is that stronger regulation came after borrowers had already been hurt. That pattern is worth paying attention to.

Building a compliant operation before a regulator forces you to is almost always cheaper and less disruptive than retrofitting one under pressure. For lenders, that means getting pricing transparent, keeping clean records, integrating with credit bureaus, and making sure collection practices can survive scrutiny, from the start rather than as an afterthought.

The other lesson is about competition. In a market with 195 licensed lenders, simply offering fast loans is not enough to stand out for long. Lenders that move into less crowded segments, such as agricultural credit, small business financing, or school fee loans, with products genuinely designed for those borrowers, will build stronger and more loyal portfolios. 

Kenya’s queue of 605 pending license applications shows the market is still attracting new entrants. The ones most likely to last are those competing on the quality of their credit decisions, not just the speed of their disbursements.

Read more: Why compliance isn’t optional for digital lenders

A market finding its footing

Kenya’s digital lending market is not perfect, but the regulatory process is clearly working. The CBK has not simply handed out licenses; it has filtered out the bad actors while letting responsible lenders grow.

The 6.6 million loans worth KSh 109.8 billion disbursed by November 2025 prove that a regulated market can still move serious credit volume. The fact that 605 applications are still waiting in the queue tells you the business opportunity has not dried up.

That said, licensing alone does not fix everything. Over-borrowing, weak bureau data, the difficulty of scoring informal earners, and unlicensed lenders still operating in the shadows are problems that will not disappear because of a press release.

Solving them requires real-time data sharing between lenders, better credit bureau coverage, and stronger identity infrastructure. No single regulator can build all of that alone. It needs lenders, technology providers, and investors pulling in the same direction.

What Kenya does show is that responsible digital lending in Africa is possible. It is harder to build than the unregulated version that came before it, slower to scale, and more demanding on operators.

But it is also more stable, fairer to borrowers, and more likely to last. For any African market still working out how to handle digital lending, that is the most important takeaway.