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In Kenya, financial institutions involved in microfinance include formal institutions (banks, non-bank financial institutions, licensed Savings and Credit Cooperatives (SACCOs)); semi-formal institutions (unlicensed SACCOs, non-governmental organizations); and informal institutions (Rotating Savings and Credit Associations (ROSCAs) and moneylenders). Deposit-taking MFIs are regulated by the Central Bank under the Microfinance Act of 2006. Regulations for licensing and supervising non-deposit taking financial institutions are under discussion. Under the SACCO Societies Act, SACCOs are regulated by the SACCO Societies Regulatory Authority (SASRA), which began operations in 2010. Under the new SACCO regulations, all deposit-taking SACCOs are required to apply for a SASRA license by June 17, 2011.

Recent legislation has been passed related to branchless banking, including the following: Finance Act  of 2010, which amends the Banking Act and Microfinance Act to allow for use of agents; Proceeds of Crime and Money Laundering Bill of 2009 (expected to become operational in June 2010); and Guideline on Agent Banking of 2010.



Microfinance & Banking

Consumer Protection

Consumer protection in Kenya lacks a cohesive policy and regulatory framework without a market-wide consumer protection law or authority. The Banking Act gives authority to the Central Bank of Kenya (CBK) to regulate banking activities, but does not define the specific mandate for consumer protection beyond regulating in the interest of consumers. The Banking Regulations of 2006 prescribe procedures to be followed for increasing the rate of banking and other fees. Particular rules govern unlawful, misleading and comparative advertising. Recourse mechanisms are left to individual banks. On the ground, a wide range of practices exist around disclosure of prices and conditions of different financial services.

Deposit-taking MFIs are regulated by the CBK with the same conventions found in the banking regulations. The Microfinance (Deposit Taking MFI) Regulations of 2008 forbid fraudulent or reckless credit and prescribe know-your-customer (KYC) requirements. Few other measures have been set in the regulations that implement the Microfinance Act of 2006. Mobile money has taken off in Kenya in an undefined regulatory space. No specific regulations about non-bank companies offering mobile financial services exist. However, the National Payment System Department (NPSD) of the CBK has provided oversight to M-PESA and other microfinance service providers (MFSPs) focusing on the integrity of information technology and the service delivery systems protecting customers from operational failures and financial failure of the MFSPs.

Savings and Credit Cooperatives (SACCOs) are constituted under the Cooperative Societies Act of 1997 and registered with the Cooperative Registrar in the Ministry of Co-operatives Development and Marketing. The SACCO Societies Act of 2009 established a comprehensive regulation and supervision framework specifically for the SACCOs, creating the SACCO Societies Regulatory Authority (SASRA). For members of SACCOs covered by SASRA, the prudential regulation and supervision will greatly increase consumer protection. SACCO members may take complaints to the District or Provincial Cooperative Officer, which are eventually forwarded to the Cooperative Tribunal.

While Kenya does not have cross-market consumer protection legislation, the Restrictive Trade Practices, Monopolies and Price Control Act of 1989 is the most comprehensive legislation related to competition in Kenya. Although the act does not empower consumer advocacy organizations to lodge a complaint or contain provisions on consumer welfare, the Public Complaints Commission does provide third-party recourse for consumers of public sector services.

Branchless Banking