The number of licensed Digital Credit Providers (DCPs) in Kenya rose to 126 as of July 2025, reflecting rapid growth in the digital lending sector following the implementation of stricter regulatory requirements by the Central Bank of Kenya (CBK).
According to according to the Central Bank of Kenya’s Financial Sector Stability Report DCPs advanced KSh 76.8 billion to the private sector in June 2025, surpassing the outstanding loan portfolio of microfinance banks.
Digital lenders overtook microfinance banks in total loans disbursed as early as December 2024. Most of the loans issued by DCPs were below KSh 20,000, consistent with their microloan model offering short-term credit with maturities ranging between one week and two months.
During the same period, the number of active digital credit accounts increased significantly from 2.4 million in December 2023 to 4 million in December 2024, and further to 5.5 million by June 2025.
Industry analysts attribute the expansion of the digital lending market to increased adoption of technology by DCPs. Digital lenders are leveraging transactional and communication data to identify customers, tailor credit products, and strengthen credit scoring and enforcement mechanisms. This digital-driven approach has helped minimise credit risk and positioned DCPs as an important source of quick, short-term financing for emergencies and small business working capital.
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However, concerns remain. The small loan sizes limit the capacity of households and businesses to make long-term, transformative investments. Additionally, the ease of access to digital loans exposes lenders to higher default risks. Some borrowers reportedly take loans without the intention to repay—an issue compounded by weak loan enforcement mechanisms in Kenya. While DCPs rely on data analytics and credit information sharing to deter potential defaulters, borrower behaviour often changes after funds are disbursed, particularly for small loan amounts.
The sector’s expansion follows the enactment of the Central Bank of Kenya (Amendment) Act, 2021, which empowered the CBK to regulate digital lenders for the first time.
The law, which came into effect on December 23, 2021, aims to ensure fair and transparent lending practices while supporting the growth of the digital credit market. To operationalise the law, the CBK issued the Digital Credit Providers Regulations on March 18, 2022.
The regulations required all previously unregulated digital lenders to apply for a CBK licence by September 17, 2022, or cease operations. This regulatory framework was introduced to address market conduct concerns, strengthen consumer protection, and promote financial stability amid rapid digital expansion. By bringing DCPs under formal oversight, the CBK seeks to foster a more ethical, transparent, and resilient credit market that can support Kenya’s evolving financial landscape.
By Obegi Malack
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