By The Weekly Vision Business Desk
The Central Bank of Kenya is pushing for substantial changes to the Microfinance Bill 2026, warning that in its current form the legislation leaves gaps wide enough to hamper Kenya’s fight against money laundering and delay its exit from global watchlists on illicit financing. In a detailed submission to the National Assembly’s Finance and Planning Committee, CBK Governor Dr Kamau Thugge argued for explicit statutory provisions that would hand the regulator clear authority to supervise and enforce compliance with anti-money laundering, counter-terrorism financing and counter-proliferation financing rules across the micro-lending sector.
The CBK has specifically recommended importing key provisions from the existing Microfinance Act 2006, notably Sections 36B and 36C, directly into the new Bill to close what it regards as regulatory loopholes. Without these additions, the Governor cautioned, microfinance institutions could remain exposed to exploitation by criminal networks seeking to move illicit funds through the sector.
The concerns are not new. Financial integrity experts and industry insiders have for some time pointed to structural weaknesses in Kenya’s microfinance and SACCO sector that make it a soft target for illicit finance. Many smaller lenders continue to operate with limited technological oversight, patchy record-keeping and a heavy reliance on cash transactions, particularly in rural and informal economies. These same features, while widening access to credit for underserved communities, also create blind spots that more sophisticated actors could exploit to layer and integrate dirty money.
Sources within the sector, speaking to The Weekly Vision on condition of anonymity, said the rapid rise of mobile money platforms has, in places, outpaced the regulatory capacity to keep up. A senior executive at a mid-tier SACCO described the sector’s oversight as weakest at its fringes, among smaller institutions, rural or informal operations, and cash-heavy, high-volume, low-value lending, adding that this kind of lending, the backbone of the micro-finance model, is inherently difficult to monitor without firmer legal backing.
The CBK’s intervention comes at a sensitive juncture for Kenya, which has spent recent years working to strengthen its financial safeguards and lift itself out of heightened international scrutiny. Should the Microfinance Bill fall short of broader anti-money laundering standards, the country risks prolonging that scrutiny, with knock-on consequences for correspondent banking relationships and the flow of foreign investment.
Yet the push for tighter controls is not without its own complications. Stricter due diligence and reporting obligations could drive up compliance costs for smaller MFIs and SACCOs, costs that may ultimately be passed on to ordinary borrowers through higher interest rates or a more cautious approach to lending.
Reactions from within the sector are mixed. A manager at a Nairobi-based fintech serving small traders welcomed the prospect of tighter oversight, arguing it would professionalise the sector and build greater trust among customers and investors alike. Leaders of several rural SACCOs, by contrast, worry that overly rigid rules could choke off lending to farmers and informal traders already under considerable economic strain.
“We support cleaning up the sector, but the transition must be phased,” one SACCO official said. “Many of our members operate in cash-based environments where rigid KYC rules are challenging to meet.” As Parliament takes up the Bill, the CBK’s recommendations are expected to trigger vigorous debate. For a sector that underpins the livelihoods of so many small-scale entrepreneurs, striking the right balance is far more than a regulatory technicality; it goes to the heart of Kenya’s economic stability and its standing in the international financial system.
