Kenya-based fintech company Wabeh narrows its buy now, pay later (BNPL) expansion, focusing instead on improving underwriting and targeted market selection.

Kenya-based fintech company Wabeh narrows its buy now, pay later (BNPL) expansion, focusing instead on improving underwriting and targeted market selection.

In a significant move, the Central Bank of Kenya (CBK) has taken regulatory control over the buy-now-pay-later (BNPL) sector, following the passage of the Business Laws (Amendment) Act, 2024 [1][2]. This legislative change classifies BNPL firms as non-deposit-taking credit providers, enabling the CBK to license operators, establish pricing rules, and enforce consumer protections.

This development marks a critical step towards closing the regulatory gap in the digital credit space, bringing previously unregulated startups like Wabeh into the formal financial system [1][2]. However, this shift has presented operational challenges for companies like Wabeh.

Wabeh, a Kenyan BNPL provider, has temporarily scaled back its merchant operations due to the new regulatory pressures and increasing defaults [1][4]. The company is currently in the process of obtaining a digital credit license from the CBK to legally scale its lending and recover capital efficiently [4].

The lack of a license has hampered Wabeh's ability to operate fully within the new regulatory framework. Other BNPL providers must also comply with these regulations, which include obtaining licenses and adhering to set rules and consumer protections [2][4].

Despite these challenges, Kenya's BNPL market continues to expand, projected to reach $1.18 billion in 2025 [2][4]. However, the high rate of non-performing loans remains a significant issue for the industry.

Wabeh's model allows customers to purchase devices by paying a deposit and repaying the balance in weeks or months [3]. The company's non-performing loan (NPL) rates are between 7-9%, lower than the 15-30% sector average [3].

In light of these developments, Wabeh is focusing on refining its underwriting models and concentrating on more profitable geographic areas [3]. The company also expects to reactivate paused merchants and expand again towards Q4 2025, once the updated models and infrastructure are in place [3].

The Business Laws (Amendment) Bill, 2024, seeks to explicitly place BNPL under CBK's purview, replacing terms like "digital credit" with broader language to capture asset financing and instalment-based models [2]. This move aims to provide a more comprehensive regulatory framework for the growing BNPL market in Kenya.

References: [1] Standard Digital. (2024). Central Bank of Kenya takes over BNPL sector regulation. [online] Available at: https://www.standardmedia.co.ke/business/article/2001381546/central-bank-of-kenya-takes-over-bnpl-sector-regulation

[2] Business Daily Africa. (2024). CBK to regulate BNPL sector, as companies seek digital credit licenses. [online] Available at: https://www.businessdailyafrica.com/corporate/banking/cbk-to-regulate-bnpl-sector-as-companies-seek-digital-credit-licenses/11566146-51551286-4w54n7z/index.html

[3] Wabeh. (2024). Wabeh scales back operations with a portion of vendor network. [online] Available at: https://www.wabeh.co.ke/news/wabeh-scales-back-operations-with-a-portion-of-vendor-network

[4] Capital FM. (2024). Wabeh applies for digital credit provider license to operate under new CBK regulations. [online] Available at: https://www.capitalfm.co.ke/business/2024/07/wabeh-applies-for-digital-credit-provider-license-to-operate-under-new-cbk-regulations/

1. The new regulations implemented by the Central Bank of Kenya (CBK) have prompted Wabeh, a Kenyan BNPL provider, to temporarily scale back its merchant operations, as they work towards obtaining a digital credit license to legally scale their lending and recover capital efficiently.
2. The increasing defaults and new regulatory pressures have presented operational challenges for startups like Wabeh, as they now need to comply with the established pricing rules, licensing, and consumer protections set by the CBK.
3. With the passage of the Business Laws (Amendment) Act, 2024, Kenya's BNPL market is undergoing a significant transformation, bringing previously unregulated startups into the formal financial system and encouraging companies to invest in refining underwriting models and expanding into more profitable geographic areas.

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