The Microfinance Bill, 2026

## SPECIALISSUE Kenya Gazette Supplement No.54 (National Assembly Bills No.9) <!-- image --> REPUBLIC OFKENYA ## KENYA GAZETTE SUPPLEMENT NATIONALASSEMBLY BILLS,2026 NAIROBI,10th March,2026 CONTENT | Bill for Introduction into the National Assembly- | PAGE | |-----------------------------------------------------|--------| | The Microfinance Bill,2026 | 203 | ## NATIONAL ASSEMBLY RECEIVED 29MAY 2026 DIRECTOR LEGAL SERVICES P.O.B041842-00100,NAIROBI <!-- image --> ## Clause ## PARTI-PRELIMINARY - 1 —Short title. - 2-Interpretation. - 3—Application. PART II -LICENSING PROVISIONS - 4Prohibition from carrying out microfinance bank - business. - 5-Application for licence. - 6——Issuance of licence - 7-—Refusal to grant licence. - 8-Classes of microfinance bank business. - 9-Central Bank'spower to examine. - 10-Revocation of licence. - 11 -Restriction on ownership of share capital. - 12-Amalgamation and transfer of assets and liabilities. ## PART II-PROVISIONS RELATING TO OPERATIONS OFMICROFINANCEBANKS - 13 - -Capital requirements. - 14 —Ratio between capital and assets - 15 Minimum liquid assets. - 16 —Risk management. - 17-Place of business. - 18-Prohibited activities. - 19 Provisions and declaration of dividends - 20 Limit on loans and credit facilities. - 21-Insider lending. - 22-Restriction on shares. ## THE MICROFINANCEBILL,2026 ## ARRANGEMENT OF CLAUSES ## PART IV -CORPORATE GOVERNANCE - 23-Participation - of significant shareholders in management. - 24-—Board of directors. - 25-Duties of directors. ## PARTV-ACCOUNTS AND AUDIT - 26-Financial year. - 27-Form of accounts. - 28-Preparation and reporting of financial statements. - 29-Submission of accounts to the Central Bank. - 30-Appointment of internal auditor. - 31-Appointment of external auditors. - 32-Auditor's duty of confidence. - 33-Exhibition and publication of audited accounts. - 34-Rectification of audited accounts. ## PART VI-INFORMATION AND REPORTING - -Collection of information and submission of - 35 returns to the Central Bank. - 36-Notification of new developments to Central Bank. - 37-Publication of information. ## PARTVHI-SUPERVISION BY CENTRAL BANK - 38 -Inspection of institutions. - 39 -Examination and control of groups. - 40-Power of Central Bank to advise and direct. - 41-Appointment of competent authority to enforce Central Bank direction. - 42 - -Online access by Central Bank. - 43 -- Powers upon audit or inspection report. - 44-Power of Central Bank to intervene in management. - 45-Voluntary liquidation. - 46-Protection from liability. ## PART VIII-MISCELLANEOUS PROVISIONS - 47-Consumer protection. - 48 -Declaration of holidays - 49 -Orders by the High Court. - 50 -Restriction on use of the word "microfinance bank - business", "microfinance" or "deposit-taking microfinance". - 51-Extension of time. - 52-Default by officers or employees. - 53 - -Outsourcing of services. - 54 -Approval of products and fees. - 55-Disclosure of information of loans. - 56-Limit on interest recovered on defaulted loans - 57 - -False advertising - 58 Prohibition of taking collateral. - 59 -Fees. - 60 - -Monetary penalties - 61 - -General penalty. - 62 -Regulations. - 63-Repeal and savings. - SCHEDULE-COMPETENTAUTHORITIES ## THEMICROFINANCEBILL,2026 ## A Bill for AN ACT of Parliament to amend the law regulating microfinance business in Kenya and for connected purposes. ENACTED by the Parliament of Kenya asfollows- ## PARTI-PRELIMINARY - 1.This Act may be cited as the Microfinance Act, Short title. 2026 and shall come into operation upon the expiry of ninety days from the date of publication. - 2.In this Act,unless the context otherwise requires"agent"means an entity contracted by an institution and approved by the Central Bank or sub-contracted by such entity to provide the services of the institution on behalf of the institution, in such manner as may be prescribed by the Central Bank: Provided that where such a third party or entity is regulated under any written law,prior approval to provide the services shall be sought from the regulator or the oversight authority; "associate"means- - (a) in relation to a company or other body corporate-— - (i) - its non-operating holding company or its subsidiary; - (ii) - ）a subsidiary of its non-operating holding company; - (ii) its holding company or its subsidiary; - (iv) a subsidiary of its holding company; Interpretation. - V a holding company of its subsidiary; - (vi) any company in which a person is a director; - or - (vii) any person who controls that company or body corporate,whether alone or with his associates or with other associates of the company or body corporate;and - (b) in relation to a natural person,any person- - (i) who is a member of the person's family; or - (ii) who is a partner or an employee of that person; and a person shall be deemed to be a member of a familyifheisthearent,pouse,brother,sister,child, uncle,aunt, nephew,niece,stepfather,stepmother, stepchild and adopted child of the person concerned, and in case of an adopted child his adopter or adopters; "bank"or "financial institution"have the meanings respectively assigned to them in the Banking Act; "beneficial owner" means ownership directlyor through one or more trustees, legal representatives, nominees,agents or other intermediaries; "branch" means an institution's place of business, used for the provision of microfinance bank business in Kenya and directly responsible to the head office of the institution for the conduct of business,and which is situated at a permanent location and address; "Cabinet Secretary"means the Cabinet Secretary for the time being responsible for matters relating to finance; "Central Bank"means the Central Bank of Kenya established under Article 231 of the Constitution of Kenya; Cap.488. "charges" means the fee,cost,expense and levied by an institution to its customer for services rendered by that institution but does not include interest rates; "competent authority"means the national authority empowered by law or regulation to license or supervise financial or non-financial entities; "control" in relation to a company or other body corporate,includes- - (a) to influence, whether directly or indirectly,the - composition of at least half of the board of directors of the company or other body corporate; - (b) to hold, directly or indirectly,whether personally - or through a holding company or companies or subsidiaries thereof,or in any other way,an aggregate of fifty percent or more of the voting power of the company or body corporate, whether alone or with associates or with other associates of the company or other body corporate; or - （c) the ability,in the opinion of the Central Bank, to exercise a dominant influence over the management or policies of the company or other body corporate on the basis of an agreement or by any other means,regardless of the amount of - formal ownership or voting rights; "co-ordinator" means theauthority among the competent authorities that is designated to coordinate the consolidated supervision and enforcement ofmicrofinance banks,non-operating holding companies sandtheir associates,which shall be the Central Bank; "corporate governance" means the set of relationships between a company's management, its'Board, its' shareholders and other stakeholders; microfinance bank for and in the name of,or in a name designated by,a customer of the microfinance bank into which money is paid by or for the benefit of such customer and on which cheques and other bills of exchange may be drawn by,and transfers and other banking transactions made on the instructions of,the customer; "deposit" means a sum of money received or paid on terms under which it shall be repaid,with or without interest or a premium and either on demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person receiving it,but does not include a sum of money which is paid as an advance or part payment under a contract for the sale,hire or other provision of property or service,where the sum is repayable only if the property or service is not sold,hired or otherwise provided; "deposit-taking business"means microfinance bank business; "deposit-taking microfinance institution" means microfinance bank; "Director"means a member of the Board of Directors ofa microfinance bank; "disclosed reserves"include all reserves created or increased through share premiums,retained profits (after deducting all expenses,provisions, taxes and dividends) permanent and unencumbered and thus able to absorb and general reserves if such disclosed reserves are losses; "group" means alicensed institutionand its subsidiaries, non-operating holding companies and subsidiaries of its non-operating holding companies; "institution" under this Act; means a microfinance bank licensed "investment"means property acquired or expenditures made for the purpose of producing income or for some other form of return on capital; "microfinance bank" means a company which is licensed to carry on microfinance bank business; "microfinance bank business"means- - （a) the accepting from members of the public of money on deposit repayable on demand or at the - expiry of a fixed period or after notice; - （b) the accepting from members of the public of money on current account and payment on and acceptance of cheques; - （c) the employing of money held on deposit or on lending,investment or in any other manner for the - current account, or any part of the money, by account and at the risk of the person so employing the money including the provision of short-term loans to small or micro enterprises or low income households; - (d) foreign exchange business;and - (e) such other business activity as the Central Bank may prescribe; "non-deposit-taking business"means a business,other than microfinance bank business as defined under this Act; "non-executive director" means an individual not involved in the day-to-day management and not a full-time salaried employee of an institution or of its subsidiaries.An individual in the full-time employment of the non-operating holding company or its subsidiaries, other than the could be construed to be directing the day to day institution concerned,would also be considered to be a non-executive director of the institution concerned,unless such individual, by his conduct or executive authority， management of the institution and its subsidiaries; "non-performing loan"means a loan or asset whose principal or interest has been due and unpaid for such period as the Central Bank may prescribe; "non-operating holding company"means a locally or foreign-incorporated company,other than the institution, which has approved control of an institution and whose activities are limited to - (a) holding investments in subsidiaries; - (b)holding properties used by group members; - （c) raising funds to invest in,or to provide support to - subsidiaries; - (d) raising funds to conduct its own limited activities; - (e) investing funds on behalf of the group; - （f) conducting the banking activities required for its - own limited functions;and - （g)providing administrative,risk management and financial services to support the efficient operation - of the group; "officer" means a director or any other person, of whatever title,who carries out or is empowered to carry out functions relating to the overall direction,in Kenya,of an institution or takes part in the general management thereof, or a manager of a significant unit of an institution licensed under this Act; "outsourcing" means the use of a third party (either an affiliated entity within a group or an entity that is external to the group) to perform activities on a continuing basis that would normally be undertaken by the institution itself,now or in the future; "place of business" means any premises, other than the head office,including a branch,agency,marketing office or such other premises as may be approved by the Central Bank,at which an institution transacts microfinance bank business and which is open to the public; "public entity"means the National Government,or a public body declared by the Cabinet Secretary to be a public entity for the purposes of this Act; "shariah compliant product"means a product designed and offered in compliance with the principles of islamic law; "significant shareholder"means a person,other than the Government or a public entity,who holds,directly or indirectly,or otherwise has a beneficial interest amounting to,five percent or more of the share capital of an institution or a corporate entity seeking to become an institution; "significantly undercapitalized"in relation to an institution, means that the institution holds less than fifty percent of the prescribed capital requirements; "undercapitalized institution"means an institution that does not fully comply with the prescribed capital requirements. 3. (1) Subject to subsection (3), this Act shall apply Application. to- 2. (a)microfinance bank business;and 3. (b) such non-deposit taking business as may be ## specified under subsection (2) (b). - (2) For the purposes of subsection (1)(b), the Cabinet Secretary may make regulations- 2. （a) specifying non-deposit taking business to which that subsection applies;and 3. (b) prescribing requirements for the conductof 4. specified non-deposit taking business. - (3) Except as provided in section 4(1), this Act shall not apply to- 6. (a)a bank, a financial institution or a mortgage finance company licensed under the Banking Act, Cap.488 except as may be provided in the said Act; 7. (b) a building society registered under the Building Societies Act, Cap.489; 8. （c) the Kenya Post Office Savings Bank established under the Kenya Post Office Savings Bank Act, Cap.493B; 9. (d) a Sacco society registered as a co-operative society under the Co-operative Societies Act or licensed under the Sacco Societies Act,Cap 490B;and 10. (e) a mortgage refinance company licensed under the Central Bank of Kenya Act, Cap 491. 11. （4) Notwithstanding the provisions of subsection (3), where any entity referred to in subsection (3) is contracted by an institution licensed under this Act, as an agent, to provide microfinance bank business on behalf of the institution,this Act shall apply to such an entity to the extent of its position as an agent of the institution. ## PARTII-LICENSING PROVISIONS - 4.(1) No person shall carry out microfinance bank Prohibition business without a licence issued under this Act. - (2)A person who contravenes subsection (1) commits an offence and shall be liable,on conviction, to a fine not exceeding five million shillings,or to imprisonment for a - (3) The provisions of subsection (1) shall not apply to a duly approved agent conducting microfinance bank - term not exceeding three years, or to both. - business on behalf of an institution. - (4) Where an agent conducts microfinance bank business on behalf of an institution in accordance with this Act, the institution shall be liable for the acts or omissions of the agent to the extent that such acts or omissions relate to that business. - 5.(1) An application for a licence to carry out microfinance bank business shall be made to the Central Bank,in the prescribed form. - (2) An application under subsection (l) shall be accompanied by such documents and comply with such requirements asmay be prescribed by the Central Bank - 6.(1) The Central Bank shall consider an application made under section 5 and shall take into account the following factors and such other factors as may be prescribed- - (a) the financial condition and history of the applicant; - (b) the suitability of the persons proposed to manage or control the applicant; - （c) the true identity and background of the ultimate - beneficiaries; - (d) the proposed organizational and shareholding - structure of the applicant; - （e) the organizational and shareholding structure of the group of which the applicant forms a part or from carrying out microfinance bank business. Application for licence. Issuance of licence. - intends to form a part and whether the group structure will hinder effective supervision of the - applicant; - (f) the adequacy of its capital structure and earning - prospects; - (g) the risk management framework to be put in place; and - (h) viability of the business. - (2) The Central Bank may,if satisfied that the applicant has met the licensing requirements, grant a - licence to the applicant upon payment of the prescribed fee. - (3) The Central Bank may endorse on a licence such conditions as it considers necessary and may,from time to time,add,vary or substitute such conditions. - (4) A licence issued under this Act shall remain valid unlessrevoked. - (5) An institution shall pay annual fees of such amount and in such manner as the Central Bank may prescribe. - （6) An institution that fails to pay annual fees by the end of the current year shall pay double the annual fees,if - the fees are paid ninety days after the end of the current financial year. - (7) Where the annual fees are not paid within ninety days after the end of the current year,the Central Bank may revoke or suspend the licence. - （8) The Central Bank may in the public interest and for reasons stated in a notice in the Gazette, suspend the - issuance of licences for such period as may be specified. 7. (1) The Central Bank may refuse to grant a licence to an applicant who in the opinion of the Central Bank has not met the requirements for the issuance of a licence. - (2) The Central Bank shall notify the applicant of the refusal,in writing,stating the reasons for refusal. Refusal to grant licence. - (3) An applicant aggrieved by the decision of the Central Bank in subsection （l) may within ninety days from the date of notification of the decision, apply to the 2. Central Bank for a review of the decision. 3. （4) In considering an application for review under subsection (3),the Central Bank may consider any relevant information including events that occurred after the Central 4. Bank made its decision. 5. （5) The Central Bank may reverse its decision in subsection (1) if it establishes that information provided by the applicant addresses the reasons for refusal. 6. 8.(1) The Central Bank may prescribe different 7. requirements for institutions and such requirements may relate to- 8. (a) licensing; 9. (b) operations; 10. (c) fees payable; 11. (d)reporting obligations;or 12. （e) any other matter as the Central Bank may deem necessary. - (2) The Central Bank may direct that certain provisions of the Act shall not apply to a certain category of institutions,if the nature,mode or place of business renders the application of the provisions unnecessary. 14. 9.(1)The Central Bank may without a warrant enter 15. any premises and examine the books, accounts,records, equipment,computer systems,software or fixtures of any person whom the Central Bank,on reasonable grounds, believes to be carrying out microfinance bank business contrary to theprovisions of this Act. - (2) In the course of an examination under subsection 17. (1),the Central Bank may take documents or copies thereof Classes of microfinance bank business. Central Bank's powerto examine. or any other item,which the Central Bankfinds relevant for purposes of further investigation or judicial proceedings. - （3) The Central Bank may,in the course of an examination under this section direct any person to produce any information,document,item or to answer any question, orally or in writing,or to carry out or refrain from carrying out such activity as the Central Bank may specify - （4) Any person who fails,refuses or neglects to- - (a) grant Central Bank access to the person's business - premises or system; - （b)produce any document,information or item - requested by the Central Bank;or - （c) comply with any direction given by the Central - Bank, commits an offence and shall be liable, upon conviction,to imprisonment for a term not exceeding three years or a fine not exceeding five million shillings. - （5) The Central Bank may seek the assistance of or refer any matter to any relevant investigative or law enforcement agency forinvestigation. - 10.(1)The Central Bank may,by notice,revoke a licence where an institution- - （a) has failed to commence business within twelve - months from the date of the licence; - (b)voluntarily requests forrevocation; - (c) ceases to carry out microfinance bank business; - (d) is wound up,liquidated or otherwise dissolved; - (e) is conducting business in a manner detrimental to the interests of its depositors or the public; - (f) has been amalgamated with another company or Revocation of licence. has been sold or its assets or liabilities have been transferred to another company without the approval of the Central Bank; - （g) has failed to comply with any of the conditions in the licence or to take any remedial measures as - directed by the Central Bank; - (h) has contravened any of the provisions of this Act - or any regulations,or guidelines made thereunder; - (i) has failed to pay the annual fees within the - prescribed time; - (j)has provided false or misleading information when applying for a licence; - the Central Bank;or - (1)has materially misrepresented its financial condition,ownership,management,operations or other facts material to its business to the Central - Bank or the general public. - (2) The Central Bank shall,before revoking a licence, give an institution not less than twenty-eight days notice to - show cause why the licence should not be revoked. - (3)TheCentral Bankshall consider any representations made to it under subsection (2). - (4) Notwithstanding the revocation of a licence under this section, the institution may continue to carry on its business for the purpose of winding up its affairs for such period as the Central Bank may determine,so long as it does not accept new deposits,open new accounts or make any loans or investments. - (5) The Central Bank may exercise any of the powers conferred on it under Part Vll if necessary for the - protection of the interests of the depositors. - (6) The Central Bank shall cause the name of every institution whose licence has been revoked to be published in the Kenya Gazette within seven days from the date of 2. revocation. 3. 11.(1) A person shall not, directly or indirectly,hold or otherwise have a beneficial interest in more than twentyfive percent of the share capital of an institution except 4. (a) another institution; 5. (b) a bank or mortgage finance company licensed under Cap.488. the Banking Act; 6. （c) the Government of Kenya or the Government of a foreign sovereign state; 7. （d)a state corporation within the meaning of the State Corporations Act; 8. (e) a foreign company which is licensed to carry on the business of an institution or bank in its country of incorporation;or 9. Central Bank. - (2) A non-operating holding company shall obtain prior written approval from the Central Bank before acquiring or holding more than twenty-five percent of the share capital of an institution. - (3) The Central Bank shall prescribe requirements for a company to qualify as a non-operating holding company forpurposes of this Act. 12. （4) The shareholding limit set under subsection (1) shall not apply to the shareholders of the exempted entities specified in subsection (1). 13. 12.(1) In this section- "acquisition"includes acquiring majority shareholding in an institution; Cap.446. Amalgamation, acquisition and transfer of assets and liabilities. Restriction on ownership of share capital. means the institutions "amalgamating institutions" intending to effect an amalgamation; "receiving institution"means the institution to which assets and liabilities are transferred through a transaction effected under this section; "resulting institution"means the institution resulting from an amalgamation effected under this section; "transferor institution" means the institution which transfers its assets and liabilities to a receiving institution. - (2) An amalgamation,acquisition or arrangement, which involves an institution as one of the principal parties to the relevant transaction,and arrangement for the transfer of all or any part of the assets or liabilities of an institution to another person,shall not have legal force except with the prior written approval of the Central Bank. - (3) The Central Bank may grant approval under subsection (2) if- 3. (a) it is satisfied that the transaction in question will not be detrimental to the public interest; 4. (b) in the case of an amalgamation or acquisition,the amalgamation or acquisition is of institutions only; 5. or 6. (c) in the case of a transfer of assets and liabilities, 7. which entails the transfer by the transferor institution of the whole or any part of its business as an institution,such transfer is effected to another institution approved by the Central Bank for the purpose of the said transfer. - (4) Upon the coming into effect of a transaction effecting the amalgamation or acquisition of one institution by another institution,or effecting the transfer of all or part of the assets and liabilities of one institution to another 9. institution pursuant to this section- 10. (a) all the assets and liabilities of the amalgamating - institutions or,in the case of a transfer of assets and liabilities,those assets and liabilities of the transferor institution that are transferred in terms of the transaction shall vest in and become binding upon the amalgamated institution or,as the case may be,the receiving institution; - （b) the amalgamated institutions or,in the case of the transfer of assets and liabilities,the receiving institution shall have the same rights and be subject to the same obligations as those which the amalgamating institution or,as the case may be, the transferor institution may have had or to which they or it may have been subject immediately before the amalgamation or transfer; - (c)all agreements, appointments,transactions and documents entered into,made,drawn up or executed with,by or in favour of any of the amalgamating institutions or,as the case may be, the transferor institution and in force immediately prior to the amalgamation or transfer,but excluding such agreements, appointments, transactions and documents that,by virtue of the terms and conditions of the amalgamation or transfer,are not to be retained in force,shall remain in full force and effect and shall be construed for all purposes as if they had been entered into,made,up or executed with,by orin favour of the amalgamated institution or,as the case may be,the receiving institution or person to whom the assets and liabilities in question are transferred;and - (d) any bond, pledge, guarantee or instrument to secure future advances,facilities or services by any of the amalgamating institutions or,as the case may be,by the transferor institution,which was in force immediately prior to the amalgamationor transfer,shall remain of full force and effect and shall be construed as a bond,pledge,guarantee or instrument given to or in favour of the amalgamated institution or,as the case may be,the receiving institution or person to whom such assets and liabilities are transferred,as security for future - advances,facilities or services by that institution or person except where,in the case of such transfer, any obligation to provide such advances, facilities or services is not included in the transfer. - for the transfer of assets and liabilities,shall be subject to - （a) confirmation at a general meeting of shareholders of - each of the institutions concerned;or - (b) in the case of a transaction effecting the transfer of - assets and liabilities of one institution to another institution,to confirmation at a general meeting of shareholders of the transferor institution and the receiving institution and the notice convening such a meeting shall contain or have attached to it the terms and conditions or the relevant agreement or arrangement. - (6) A notice of the passing of the resolution - confirming any amalgamation,acquisition or arrangement, or any arrangement for the transfer of assets and liabilities, together with a copy of such resolution and the terms and conditions of the relevant agreement or arrangement,duly certified by the chairperson of the meeting at which such resolution waspassed and by the secretary of the institution concerned shall be sent to the Central Bank by each of the institutions involved and after receipt of such notices from all the parties to the relevant agreement or arrangement,the Central Bank shall publish those notices. - (7) Upon the publication by the Central Bank of the notices referred to in subsection (6) - （a) of any amalgamation of two or more institutions, - the licences of each of the amalgamating institutions shall be deemed to be cancelled and shall be withdrawn by the Central Bank,and on payment by the resulting institution of the prescribed licence fee, the Central Bank shall register such institution subject mutatis mutandis to the licensing provisions of this Act; or - (b) of any arrangement for the transfer of all the assets and liabilities of an institution,the licence of such institution shall be deemed to be cancelled and shall bewithdrawn by the Central Bank. - （8) Upon the licensing of an institution pursuant to subsection (7),the Central Bank shall issue a licence to the - institution. - (9) The Registrar of Companies and the Registrar of Titles, and every officer or person in charge of a deeds registry or any other relevant office shall,if in his office or in any register under his control- - (a) there is registered any title to property belonging to,or any bond or other right in favour of,or any appointment of orby;or - (b) there is registered any share,stock,debenture or othermarketable security in favour;or - （c) there has been issued any licence to or in favour of any amalgamating or transferor institution,and if satisfied- - (i) that the Central Bank has approved the - amalgamation or transfer pursuant to subsection (1);and - （ii) that such amalgamation or transfer has been duly effected, and upon production to him of any relevant deed, bond,share,stock debenture,certificate,letter of appointment,licence or other document,make such endorsements thereon and effect such alterations in his registers as may be necessary to record the transfer of the relevant property bond or other right, share,stock, debenture,marketable security,letter or appointment or licence and of any rights thereunder to the resulting institution or, as the case may be, to the receiving institution. - (10) No transfer fees,stamp duty,registration fees, licence duty or other charges shall be payable in respect 2. of- - (a) a transfer of assets and liabilities under subsection - (4）;or - (b) any endorsement or alteration made to record such transfer,upon submission to the Registrar of Companies,Registrar of Titles or any other person referred to in subsection (9). - (11) The provisions of this section shall not affect the rights of any creditor or any institution which has amalgamated with or transferred all its assets and liabilities to any other institution or taken over all the assets and liabilities of any other institution,except to the extent provided in this section. - (12) The Central Bank may prescribe the conditions to be met before an amalgamation,acquisition or transfer of assets or liabilities is effected and the consequential rights and liabilities of the parties after the amalgamation, acquisition or transfer. ## PARTIII-PROVISIONS RELATINGTO ## OPERATIONS OF MICROFINANCE BANKS - 13.(1) An institution shall maintain the minimum capital requirements set out in the First Schedule. - (2) The Central Bank may, by order in the Gazette, - amend the First Schedule. - (3) The Central Bank may prescribe other forms of - capital to be maintained by institutions. - 14.(1)The Central Bankmay prescribe the minimum ratios which shall be maintained by institutions and their groups as between their core capital and total capital on one hand and their assets (including their total loans and advances) and off balance sheet items on the other. Capital requirements. Ratio between capital and assets. - (2) The Central Bank may,for the purpose of determining ratios which shall bemaintained by institutions and their groups, determine the method of classifying and evaluating assets. 2. （3) The Central Bank may require higher minimum 3. capital ratios for an individual institution for the following reasons- 4. institution; 5. (b) significant exposure to risk by an institution; 6. （c) high,or particularly severe volume of poor asset quality held by an institution; 7. （d) rapid growth of an institution,either internally or through acquisitions without adequate 8. (e) the likelihood that an institution may be adversely affected by the activities or conditions of its holding company,associates or subsidiaries; 9. （f) the systemic importance of the institution;or 10. （g)any other reason as the Central Bank may determinebased onitsassessmentofthe institution's or group's risk profile. 11. （4) A non-operating holding company or any other vehicle of ownership which controls a group shall,in relation to its business,maintain adequate capital and adequate forms of liquidity to demonstrate that it is a source of strength for the institution and shall comply with any regulations or guidelines issued by the Central Bank on minimum ratios or capital requirements in any other form. 12. 15.（1) An institution shall,at all times,maintain such minimum holding of liquid assetsasmay beprescribed by 13. the Central Bank. - (2) For the purposes of this section,"liquid assets" 15. means- Minimum liquid assets. - (a) notes and coins which are legal tender in Kenya; - (b) balances held at the Central Bank; - （c) balances held at banks,microfinance banks and mortgage finance companies after deducting therefrom any balance owed to those banks, microfinance banks finance companies; - (d) Kenya Government treasury bills and treasury bonds which are freely marketable and re- - discountable at the Central Bank; - （e) balances held at banks abroad which may be wthdrawn on demand or short notice and money at call abroad after deducting therefrom balances owed to banks abroad where the balances and money at call and short notice are denominated in convertible currencies; and for the purposes of this paragraph "bank abroad"means a bank outside Kenya or an office outside Kenya of any bank;or - (f) such other assets as the Central Bank may specify. 16. An institution shall at all times take measures to identify, assess, manage, monitor and control all risks relating to its business,and shall comply with such risk management requirements as may be prescribed by the - Central Bank. ## 17.1) The Central Bank may specify- - (a) places of business which shall require the prior approval of the Central Bank to open, relocate or - close; and - (b) places of business which shall be notified to the Central Bank before or after opening,relocating or closing. - (2) Without prejudice to subsection (1)(a), an institution shall not open a branch in Kenya or any place of business outside Kenya without the prior approval of the Central Bank. - (3) An institution shall not establish a subsidiary in or outside Kenya without the prior approval of the Central Risk manageiment. Place of business. Bank. - （4) The Central Bank may prescribe requirements relating to the opening,relocation and closing of places of business in Kenya or outside Kenya. - （5) The Central Bank may permit an institution to enter into an arrangement with a foreign bank or a foreign institution to enable customers of the institution to access limited services through the foreign bank or foreign institution while outside Kenya. ## 18.(1) An institution shall not- - (a) engage in wholesale or retail trade, including the import or export trade,except- - (i) in the course of satisfaction of debts due to it; or - （ii) when providing shariah compliant products, approved by the Central Bank,to its customers; - （b) acquire or hold,directly or indirectly,any part of the share capital of,or otherwise have a beneficial interest in,any financial,commercial,agricultural, industrial or other undertaking where thevalue of the institutions interest would exceed in the aggregate twenty-five percent of the core capital of - that institution: Provided that an institution may take an interest beyond the limit prescribed in subsection (1)(b)- - (i) in satisfaction of a debt due to it but,if it does so, it shall dispose of the interest within such time as the Central Bank may allow; - (ii) as may be approved by the Central Bank and on such conditions as the Central Bank may impose. - （c) purchase or acquire or hold any land or any interest orright therein except such land or interest as may be reasonably necessary for the purpose of Prohibited activities. conducting its business, or for housing or providing amenities for its staff,where the total amount of such investment does not exceed such proportion of its core capital as the Central Bank may prescribe; Provided that this paragraph shall not prevent an institution from- - (i) letting part of any building which is used for the purpose of conducting its business; - (ii) securing a debt on land and,in the event of default in payment of the debt,holding the land for so long as,in the opinion of the Central Bank, is needed for the realization of the debt;or - (ii) purchasing,acquiring or holding land for purposes of its microfinance bank business when providing shariah compliant products approved by the Central Bank. - (2) The Central Bank may,by notice in the Gazette, - exempt an institution from the provisions of this section subject to such conditions as the Central Bank may consider necessary. - 19.(1) No institution shall pay dividends on its shares or make any other form of distribution to its shareholders until all its capitalized expenditure has been written off and provision has been made for bad and doubtful debts in - accordance with subsection (2). - (2) Every institution shall- - (a) make provision for bad and doubtful debts before - any profit or loss is declared;and - (b) ensure that the provision under paragraph (a) is adequate and conforms with such guidelines as may - be prescribed by the Central Bank. - 20.(1) An institution shall not grant a loan or credit facility to any person where the loan or credit facility,in Provisions and declaration of dividends. Limit on loans and credit facilities. the aggregate,exceeds such limit of its core capital as the Central Bank may prescribe. - (2) The provisions of this section shall not apply to transactions with a public entity or to transactions between 2. institutions. 3. （3) For the purposes of subsection (1),reference to "person"includes- 4. (a) that person and his associates; 5. (b) the loans,credit facilities,financial guarantees and other liabilities of that person and his associates shall be aggregated for the calculation of their total value;and 6. (c) the restriction imposed by subsection (l) shall guarantees and other liabilities to or in respect of 7. applytoloans,creditfacilities,financial that person and his associates. 8. （4) An institution shall not grant a loan or credit facility against the security of its own shares and those of 9. its subsidiaries. 10. （5) A person who contravenes the provisions of this section commits an offence and shall be liable,to such penalty as the Central Bank may prescribe. 11. 21.(1) An institution shall not grant a loan,credit facility or give any financial guarantee to its associates,or to an officer or member of staff of the institution,or their associates,in excess of such limits as the Central Bank may prescribe. - (2) A person who contravenes subsection (l) commits an offence and shall be liable,on conviction,to a fine not exceeding five million shillings,or to imprisonment for a term not exceeding five years, or to both. - (3) Where an institution contravenes subsection (1)- Insider lending. - （a) all officers and significant shareholders of the institution shall be liable jointly and severally to indemnify the institution against any loss arising in - respect of the advance, loan or credit facility: Provided that in the case of an advance,loan or credit facility to a person other than a director of the institution or a senior officer or significant shareholder,an officer shall not be so liable if he shows that,through no act or omission on his part,he was not aware that the contravention was taking place or was intended or about to take place,or he took all reasonable steps to prevent it from taking place; - (b) the Central Bank may,in the case of an advance, loan or credit facility to a director of the institution,direct the removal of such director from the board of directors of the institution and may direct the suspension of any other officer or employee of the institution who sanctioned the advance,loan or credit facility and the institution shall comply with every direction of the Central Bank under this paragraph forthwith. - (4) A director, officer or any other person who is aggrieved by any directions given under subsection (3) may appeal to the High Court. - (5) The High Court may confirm, reverse or modify the decision and make such other order in the circumstances as it considers just and pending the determination of any application or appeal therefrom, the decision or action taken shall remain in effect. - （6) A director who,without any justifiable cause has a non-performing asset in his name directly or indirectly from any institution licensed under this Act or the Banking - Act,shall forthwith be disqualified from holding office. - (7) An institution which- 2. （a) fails to comply with any direction of the Central Bank under subsection (3)(b);or 3. (b) permits a director who is disqualified by virtue of subsection (6) to continue holding office as such, commits an offence. - （8) Where an offence under subsection (7) continues, the institution shall,in addition to the penalty under subsection (2) be liable to such penalty as may be prescribed for each day or part thereof during which the offence continues. - (9) The provisions of subsections (1) and (2) shall apply to a group on a consolidated basis. - (10) Except as is otherwise provided for under this section,any person who contravenes the provisions of this section shall be liable to such penalty as the Central Bank may prescribe. - 22.(1) A person shall not transfer, or cause to be transferred,five percent or more of the shares of an institution without theprior approval of the Central Bank. - (2) Where any share is held by a company or other corporate body,or by a nominee on behalf of another person,the company or other corporate body,or the nominee,as the case may be, shall disclose to the Central Bank and to the institution the full particulars of the individual person who is the ultimate beneficial owner of the shares. - (3) No person shall become a significant shareholder except with the prior written approval of the Central Bank. - (4) The Central Bank may require an institution to Restriction on shares. submit to it on a periodic basis,a list of current shareholders of the institution showing shares held on own account,by nominees and the individual ultimate beneficiaries of shares held by nominees or corporate shareholders. - (5) A person who contravenes any of the provisions of 2. this section shall be liable to such penalty as the Central Bank may prescribe. ## PARTIV-CORPORATE GOVERNANCE - 23.No significant shareholder of a microfinance bank shall be an executive director or form part of the senior management of the institution or institution's non-operating - holding company. - 24.(1) Every institution licensed under this Act shall have a board of directors comprising of at least five directors-— - （a) three fifths of whom shall be non-executive - directors; - (b) one third of whom shall be independent non- - executive directors;and - (c) the board of directors shall be headed by a Chairperson who shall be an independent nonexecutive director. - (2) A person shall not become or remain as a director of an institution unless such person has been vetted by the Central Bank and found to be a fit and proper person in accordance with such fit and proper test as the Central Bankmay prescribe. - (3) Notwithstanding that a person has already been vetted as a director of an institution,a director shall not assume the office of the Chief Executive Officer of the institution or the Chairperson of the board unless the director has been re-vetted by the Central Bank and found - to be fit to discharge the responsibilities of that office. Participation of shareholders in significant management. Boardof directors. - (4) A person shall not be permitted to hold the position 2. of director in more than one institution licensed under the Act unless the institutions are subsidiaries of non-operating holding companies. 3. 25.(1) A director shall in relation to the institution in 4. which he or she serves,stand in a fiduciary relationship and shall in addition and without derogation owe the institution and its shareholders the following duties- 5. (a) the duty to act honestly and in good faith; 6. (b) the duty to act in the best interest and for the 7. benefit of the institution; 8. （c) the duty to act independently,free from undue 9. influence of any other person;and 10. (d) the duty to access necessary information to enable him or her to discharge his or her responsibilities. - (2) The board of directors as an organ and each director individually shall immediately report,in writing,to the Central Bank if they have reason to believe that- 12. (a) the institution may not be able to properly conduct 13. its business as a going concern; 14. (b) the institution appears to be or is likely in the near future to be unable to meet all,or any of its 15. obligations to its depositors or creditors; 16. （c) the institution does not,or may not be able to meet 17. its capital requirements as prescribed in this Act. - (3) Where the board of directors or a director fails, omits or neglects to report to the Central Bank any matter required to be reported under subsection (2) of this section, the Central Bank may- 19. (a) remove the board of directors as an organ; 20. (b) withdraw its approval of any of the directors; or 21. (c) take such other action as it may deem appropriate. Dutiesof directors. ## PARTV-ACCOUNTS AND AUDIT - 26.The financial year of an institution shall be the - period of twelve months ending on the 31st December in each year. - 27.(1) All entries in any books of accounts and all accounts kept by an institution shall be recorded in the English language and in the system ofnumerals employed in government accounts. - (2) An institution shall maintain proper books of prepare an annual statement of accounts,including a - accounts and,at the expiration of each financial year, statement of comprehensive income and statement of financial position and other disclosures in the format prescribed by Central Bank. - （3) An institution shall keep accounts and records which- - (a) reflect a true and fair state of affairs;and - (b) explain all transactions and financial positions to enable the Central Bank determine whether the institution has complied with theprovisions of this Act. - (4) The Central Bank may, at any time, issue - directions to an institution requiring it to maintain such books,records or information,in addition to any books, records or information as the Central Bank may consider necessary. - 28.(1) The accounts and other financial records of an institution shall be denominated in Kenya shillings and shall comply with the requirements of- - (a) the Companies Act; - (b) International Accounting Standards; - （c)International Financial Reporting Standards;and - (d) such other requirements as the Central Bank may Financial year. Form of accounts. Preparation and reportingof financial statements. Cap.486. prescribe. - (2) The Central Bank may, for regulatory purposes, require an additional accounting consolidation which excludes insurance and such other subsidiaries as the Central Bank may prescribe. 2. 29.(1) An institution shall,not later than three months 3. after the end of its financial year,submit to the Central Bank its audited financial statements covering its activities. - (2) An institution with foreign operations shall submit to the Central Bank an audited statement of financial position and comprehensive income of the institution as a whole. 5. 30.(l) Every institution shall establish an internal 6. audit function which shall report to the audit committee of its board. - (2) A person shall not be appointed as an internal auditor under this section unless the person holds such relevant academic and professional qualifications and has such experience as may be prescribed,and is approved by the Central Bank. - (3) The internal auditor shall examine,evaluate and controls as a contribution to the proper, economic, efficient 9. report on the adequacy on financial matters and internal and effective use of resources. 10. 31.(1) An institution shall,in each year,appoint an external auditor who shall be a person qualified under subsection (2) and approved for appointment as such by the 11. Central Bank. - (2) A person shall be qualified for appointment as an 13. external auditor of an institution if that person- 14. （a) is qualified as an auditor under the Companies Cap.486. 15. Act; and Submission of accounts to the Central Bank. Appointment of internal auditor. Appointment of external auditors. ## (b) is not- - (i)an officer or employee of the institution; - (i)a partner of an officer or employee of the - institution; - （i) an employer or employee of an officer or - employee of the institution; - (iv) an officer or employee of an associate of the institution; - (V) apartner or an employer of a person who regularly performs the duties of secretary or book-keeper for the institution;or - (vi) a firm or member of a firm of auditors of which any partner or employee falls within the categories enumerated in this section. - (3) The external auditor shall audit the accounts and - activities of the institution and shall make a report on the annual statement of comprehensive income and the annual statement of financial position of the institution and the audit report shall be submitted to the Central Bank. - (4) The Central Bank may appoint an external auditor and fix the remuneration to be paid by the institution where an institution has failed to appoint an approved external auditor under subsection (1),or to fill any vacancy for an external auditor. - (5) The Central Bank may require an external auditor to undertake the following duties in addition to those - provided under subsection(3)- - （a) to submit such additional information in relation to his audit as the Central Bank may consider necessary; - (b) to carry out any other special investigation; and - （c) to submit a report on any of the matters referred to - inparagraphs (a) and (b); - （6) The institution for which the additional audit is undertaken under subsection （5) shall remunerate the auditor in respect of the discharge by him of all or any of such additional duties. - （7） If the external auditor of an institution,in the - course of the performance of his duties under this Act,is satisfied that- - (a) there has been a serious breach of or noncompliance with the provisions of this Act, the Central Bank of Kenya Act,the regulations, guidelines or other matters prescribed by the Central Bank; - (b)a criminal offence involving fraud or other - dishonesty has been committed by the institution or any of its officers or employees; - （c) losses have been incurred which reduce the core - capital of the institution by fifty percent or more; - （d) serious irregularities have occurred which may - jeopardize the security of depositors or creditors of the institution;or - （e) he is unable to confirm that the claims of depositors and creditors of the institution are capable of being - met out of the assets of the institution, the external auditor shall immediately report the matter to the Central Bank. - (8) The Central Bank may arrange tripartite meetings with an institution and its auditor from time to time,to discuss matters relevant to the Central Bank's supervisory responsibilities which have arisen in the course of the statutory audit of the institution including relevant aspects of the institution's business,its accounting and control system and its annual accounts. - (9) If an external auditor of an institution fails to comply with the requirements of this Act,the Central Bank may remove the external auditor from office and appoint another external auditor as a replacement. Cap.491. - （10) An institution shall not remove or change its external auditor except with the prior approval of the Central Bank. - (11) An external auditor shall make a report to the board of directors identifying key concerns with respect to the financial condition of the institution. - (12) An external auditor's report submitted under - subsection （13) shall contain information on the- - （a) solvency of the institution; and - （b) any violation of this Act,guidelines,regulations; or conditions imposed on the licence. - （13) An external auditor shall,within three months after the end of each financial year,submit an audit report to the Central Bank,on the financial condition of the institution including the management letter. - 32.(1) An auditor shall not be regarded as having - contravened any duty to which an auditor of an institution may be subject by reason of his communicating in good faith to the Central Bank,whether or not in response to a request made to it,any information or opinion on any matter to which this Act applies and which is relevant to any function of the Central Bank under this Act. - (2) This section applies to any matter of which an auditor becomes aware in his capacity as an auditor or in the discharge of his duties under this Act and which relates to the business or affairs of the institution or any associate of that institution. - 33.1) Every institution shall- - （a) exhibit throughout the year in a conspicuous position in every office and branch in Kenya a copy of its last audited financial statements which shall be in conformity with theminimum financial disclosure requirements prescribed from time to time by the Central Bank together with the full and correct names of all directors and significant shareholders of the institution; Auditor's duty of confidence. Exhibition and publication of audited accounts - (b) within three months after the end of each financial year,cause a copy of the last audited statement of comprehensive income and last audited statement of financial position for that financial year to be published in a newspaper with wide circulation; - and - （c) the financial statements referred to in paragraph - (b) shall be approved by the Central Bank before publication. - (2) The financial statements shall be in conformity financial reporting standards,i including applicable - with international accounting standards and international consolidated accounting principles for groups. - (3) An institution that does not comply with the provisions of this section shall be liable to such penalty as - the Central Bank may prescribe. - 34.Where the Central Bank is satisfied that the audited accounts of an institution do not comply with the - requirements of this Act or that the audited accounts contain information that may be misleading or are not published in the specified form, the Central Bank may require the institution to- - (a) amend the audited accounts to comply with the Act; - (b) correct the misleading information; - （c) re-publish the amended audited accounts;or - (d) submit to the Central Bank further documents or information relating toany document or information. ## PART VI-INFORMATION AND REPORTING ## REQUIREMENTS - 35.(1) The Central Bank shall collect such data and - other information as may be necessary to enable it maintain supervision and surveillance of the affairs of an institution, its group,its agents and the protection of depositors and, for that purpose, the Central Bank may require an institution and its group and agents to submit statistical and other returns on a periodic basis in addition to any other Rectification of audited accounts. Collection of information and submission of returns to the Central Bank. returns required by law. - (2) The Central Bank may require any institution,its 2. group and its agents to furnish it with such information as it may reasonably require for the proper discharge of its functions under this Act. 3. （3) The information required to be furnished under subsection (2) may include information relating to any company which is an affiliate,an associate,a non-operating with such information. 4. （4)Inadditiontoinformationrequiredfrom institutions,its group and agents pursuant to subsection (2), the Central Bank shall require any associate,non-operating holding a significant shareholding in an institution,in writing,to provide the Central Bank or its appointed agent such informationordocuments,including financial statements and other financial records,as it may deem necessary to determine whether the provisions of this Act are being duly complied with,and to ascertain- 5. (a) the legal,managerial and operational structure of 6. the group; 7. (b) the risk profile of the group and its individual 8. subsidiaries; 9. （c) the way in which internal risk management is 10. organized and conducted within the group; and 11. (d) the corporate, financial and other linkages existing 12. between members of the group. 13. 36.An institution shall promptly and in advance notify the Central Bank of any substantive changes in its activities,structure and overall condition,or as soon as it becomes aware of any material adverse development, including breach of legal orprudential requirements. Notification of new developments to Central Bank publish,in whole or in part,any information furnished to it under this Act. - (2) The Central Bank shall not publish information under subsection (1) if the information is likely to disclose the financial affairs of any person,without the prior written consent of that person. - (3) Except as provided in this Act or any other written law,a person shall not disclose or publish any information which comes into his possession as a result of the performance of his duties under this Act. 3. （4) Notwithstanding the provisions of this section the Central Bank may disclose any information referred to in subsection (3) to the Kenya Deposit Insurance Corporation, Financial Reporting Centre,any monetary authority, financial regulatory authority,foreign deposit protection institution, fiscal or tax agency; or fraud investigations agency,within or outside Kenya,where such information is reasonably required for the proper discharge of the functions of the Central Bank or at the request of the Kenya Deposit Insurance Corporation, foreign deposit protection institution,Financial Reporting Centre,monetary authority, financial regulatory authority,fiscal or tax agency; or fraud investigations agency: Provided that the sharing of information with entities outside Kenya shall only apply where there is a reciprocal arrangement. - (5) The Kenya Deposit Insurance Corporation and institutions licensed under this Act,the Banking Act and the Sacco Societies Act shall, in the ordinary course of business and in such manner and to such extent as the Central Bank may,in regulations,prescribe,exchange such information on performing and non-performing loans and such other credit information as may,from time to time,be specified by the Central Bank. Cap.488. Cap.490B - （6) The Central Bank and institutions licensed under - this Act,institutions licensed under the Banking Act and Sacco Societies Act may,in the ordinary course of business required for the proper discharge of their functions,in such manner and to such extent as the Central Bank may prescribe in regulations. - (7) The regulations made under subsection (5) and (6) - may provide for the establishment and operation of credit reference bureaus for the purpose of collecting prescribed credit information on clients of institutions licensed under this Act and institutions licensed under the Banking Act and Sacco Societies Act and disseminating the information among such institutions for use in the ordinary course of business,subject to such conditions or limitations as the Central Bank may prescribe. - （8) An institution,its officers or employees shall not be in breach of a duty that they may be subject to due to the disclosure,in good faith,of any information under this section,to- - (a) the Central Bank or to another institution; - (b)acreditreferencebureau establishedunder subsection （7),in the course of the performance of their duties and no action shall lie against the institution or any of its officers or employees on account of such disclosure; - （c) a bank, financial institution or mortgage finance company licensed under the Banking Act or a Sacco licensed under the Sacco Societies Act; - section 38;or - (e) any person, authority, agency or entity referred to in subsection (4) or any other person or authority which under any written law may be authorised to - receive information. - (9) Nothing in this Act shall prevent the cross-border - sharing of credit information between- Cap.488. Cap.490B. Cap.488. Cap.490B Cap.488. Cap.490B - （a) regulators or supervisory authorities and credit reference bureaus or entities performing similar roles; - (b) institutions and credit reference bureaus or entities - performing similarroles; - (c)regulators JO supervisory authorities and institutions; - (d) institutions: Provided that-- - (a) there is a mutual legal framework for the sharing - ofinformation;and - (b) the credit information is required for the discharge ofa lawful duty or the performance of a lawful purposeby the person requesting forthe information. ## PART VII-SUPERVISION BY CENTRALBANK - 38.(1) The Central Bank may,at any time cause an inspection of an institution,its agents or outsourced service providers to be made by a person authorized by the Central Bank,in writing. - (2) An institution, agent or outsourced service provider undergoing an inspection and every officer or employee thereof shall produce and make available,to the person undertaking the inspection, all the books, accounts, records,other documents,equipment,computer systems, software or fixtures relating to the microfinance bank business and such correspondence, statements and information relating to the business as the person undertaking the inspection may require,within such period - as that person may specify in writing. - (3) A person who does not produce the information or items required under subsection (2) within the specified conviction to imprisonment for a term not exceeding five - period commits an offence and shall be liable upon years or a fine not exceeding ten million shillings. Inspection of institutions. - (4) The person undertaking an inspection shall prepare and submit a report to the Central Bank stating,in detail, whether or not there is- 2. (a) any breach or contravention of this Act, any 3. regulations or guidelines made thereunder or any direction issued by the Central Bank; 4. (b) any irregularity in the manner of conduct of the inspected institution; 5. （c) any mismanagement of the institution;and 6. （d) any other matter relating to the institution not consistent with sound business practice. - 5) The Central Bank may assist investigative agencies or other authorities in matters related to suspected fraud or malfeasance in institutions at the request of such agencies or authorities or by identifying such matters for referral to such agencies or authorities. 8. （6) For purposes of this Act, the Central Bank shall be the coordinator of the consolidated supervision of groups, and as such may appoint a competent authority from- 9. (a) amongst the bodies set out in the Second Schedule, 10. or 11. (b) any other person or entity with expertise in the relevant field; to carry out an inspection of the operations of the associate, holding or subsidiary company of an institution,or of any person who exercises control of an institution,in order to satisfy itself that the operations of the associate,company or other person are not detrimental to the safety and soundness of the institution. 39. Upon receipt of a report under section 31(7), the Central Bank may 2. (a) require changes to the legal or management Examination and control of groups. structure of a group if it determines that such structures in their current form constitute an impediment to the discharge of the Central Bank's supervisory responsibilities;and - (b) require a group to retain a single auditor to provide - an overall review of the group,including such consolidated financial statements as the Central Bank may prescribe. - 40.(1) If, at any time, the Central Bank has reason to - believe that- - (a) the business of an institution is being conducted in a manner that is contrary or in contravention to the requirements of this Act or of any regulations or guidelines made thereunder or in any manner detrimental to or not in the best interest of its - depositors or members of the public;or - （b) an institution,any of its officers or other person - participating in the general management of the institution is engaged in any practice likely to occasion a contravention of any of the provisions of this Act or any regulations or guidelines made thereunder, the Central Bankmay- - (i) give advice and make recommendations to the institution with regard to the conduct of its - business generally; - （ii) issue directions regarding measures to be taken to improve the management or business methods of the institution or to secure or improve compliance with the requirements of this Act, any regulations or guidelines made thereunder or any other written law or regulations; - (ii) in any case to which paragraph (i) applies, Powers of the Central Bank to advise and direct. direct the institution,officer or other person to cease such practice; - competent in the opinion of the Central Bank, to advise and assist the institution generally or for the purposes of implementing any directions under subparagraphs （ii) and (ii) have the same force and effect as a direction made under subparagraphs (ii) and （ii) and shall be deemed to be a direction of the Central Bank under this section. - (2) An institution shall comply with a direction under this section within such period as may be specified in the direction and,if so required,produce the evidence of compliance. - （3) The Central Bank may issue directions to institutions generally for the better carrying out of their functions under this Act and in particular,with respect to- - （a) the standards to be adhered to by an institution in the conduct of its business in Kenya or in any country where a branch or subsidiary of the institution is located;and - (b) guidelines to be adhered to by institutions in order to maintain a stable and efficient banking and - financial system. - （4)A person who refuses,fails or neglects to comply with any direction under this section shall be liable to such - penalty as the Central Bank may prescribe. - 41.(1) If the Central Bank determines- - institution has violated any provision of this Act, Appointment of competent authority to enforceCentral Bank directions. regulations or guidelines made thereunder,or - (b) that the activities of any such member are having a detrimental impact on the institution or may - jeopardize the interest of depositors, the Central Bank may direct the member to eliminate such irregularities within such period as it may determine. - (2) The Central Bank may appoint a competent 2. authority from amongst the bodies set out in the Second Schedule or any other entity with expertise in the relevant field to enforce the directions issued under subsection (1). 3. （3) The Central Bank may,in addition to the actions specified under subsection (2), direct the concerned party to- 4. （a) suspend any further investment by the institution 5. in a subsidiary company; 6. (b) suspend the exercise of a non-operating holding 7. company's control of the institution; 8. (c) suspend transactions between any associated entity 9. and the institution;or 10. （d) suspend participation of any person in the affairs of the institution. 11. 42.(1) An institution shall at all times grant to the Central Bank a secure remote online access to its information technology infrastructure and information management systems as the Central Bank may require for purposes of discharging its functions under the Act. - (2) The Central Bank may view,extract or download any information accessed in accordance with subsection 13. (1). 14. 43.(1) Where an external auditor's report or an inspection report under this Act reveals,or the Central Bank otherwise becomes aware that an institution conducts its business in a manner that is contrary to the provisions of 15. this Act, regulations or guidelines issued thereunder or in Online accessby Central Bank. Powers upon audit or inspection report. any manner detrimental to or not in the best interests of its depositors or members of the public,or that an institution is undercapitalized,the Central Bank may- - （a) restrict,suspend or prohibit the payment of - dividends by the institution; - (b) prohibit the conversion of any profits of the - institution into capital; - （c) direct the suspension or removal of any officer involved in such conduct from the service of the institution; - （d) require the institution to reconstitute its board of directors; - (e) withhold any corporate approvals with respect to - such institution; - （f) undertake more frequent inspections of that - institution; - （g) order the institution to submit to the Central Bank, within forty-five days,a capital restoration plan to restore the institution to the prescribed capital adequacy or,in the case of issues unrelated to capital,a plan to resolve all deficiencies to the satisfaction of the Central Bank; - (h) prohibit the institution from awarding any bonuses or increments in salary,emoluments or other benefits to the directors and officers of the - institution; - (i) at the expense of the institution, appoint a person who in the opinion of the Central Bank is suitably qualified and competent,to advise and assist the institution to design and implement a capital restoration plan or other corrective action and regularly report to the Central Bank on the progress of the plan; - impose restrictions on growth of assets or liabilities of the institution as it deems fit; - (k) restrict the rate of interest on savings and time deposits payable by the institution to such rates as - the Central Bank shall determine;or - (l) order the institution to do any or take such other actions as it may deem necessary to rectify a - capital deficiency or other weaknesses. - 44.(l) The Central Bank may intervene in the affairs of an institution where- - （a) the institution has contravened the provisions of - this Act or the conditions upon which its licence was granted; - (b) the business of the institution is being conducted in a manner detrimental to the interests of its - depositors or creditors; - （c) the institution has failed to maintain the prescribed - minimum core capital; - （d) the institution has insufficient assets to cover its liabilities; - (e) the institution is significantly undercapitalized; - (f) the auditor of an institution makes a report to the Central Bank under the provisions of section 31(7); - (g) the Central Bank discovers, on an inspection or otherwise,or becomes aware of any fact or - circumstance which,in the opinion of the Central Bank,warrants the exercise of the relevant power in the interests of the institution or its depositors or other creditors; - (h) the institution has failed- - (i) to submit a capital restoration plan or a plan to resolve all deficiencies as directed by the - Central Bank;or - （ii) to add more capital, and failed, neglected or refused to complywith an order or to implement a plan of correction. - (2) The Central Bank shall,before intervening in the affairs of an institution under subsection (1),issue the Power of Central Bank to intervene in management. institution with a notice specifying the defaults noted in the conduct of the business and require the institution to take remedial action within such period as may be specified in the notice. - （3) Where an institution does not comply with the notice issued under subsection (2),the Central Bank may- - （a) direct the institution to take such steps as the Central Bank may consider necessary to rectify the default; - (b) prohibit the receipt of any fresh deposits or limit lending operations; - （c) remove any officer or employee of an institution who,in the opinion of the Central Bank,has caused or contributed to any contravention of any provision of this Act or any regulations or guidelines made thereunder,or to any deterioration in the financial stability of the institution,or has been guilty of conduct detrimental to the interests of depositors or other creditors of the institution; - (d)prohibit any declaration of dividends; - （e) impose on any member of the management responsible for the default such penalty as may be prescribed; - (f) close the institution and revoke its licence; - （g） impose any restriction or condition it may consider necessary onany arrangement between the institution and its agencies; - (h) direct the institution to terminate any agency - arrangement;or - (i) levy a monetary penalty of such amount as the Central Bank may deem fit. - （4) Where the Central Bank intervenes in the management of an institution,it may- - microfinance bank business to its Board of Directors,to hold office as a Director for a period not exceeding twelve months,who shall not be removed from office except with the prior approval of the Central Bank; - (b) by notice in the Gazette, revoke or cancel any existing power of attorney,mandate,appointment or other authority by an institution in favour of any - officer or employee or any other person; or - （c) appoint the Kenya Deposit Insurance Corporation toassumecontrol and management of the institution in accordance with the Kenya Deposit - Insurance Act. - 45.(1) An institution may,with the approval of the - Central Bank,voluntarily liquidate itself if it is able to meet all its liabilities. - (2) An application for the Central Bank's approval for the purposes of subsection (1) shall be in the prescribed - form. - (3) The Central Bank may, upon receipt of an - application under subsection (2), approve the application if satisfied with the solvency of the institution. - (4) The Central Bank shall upon approving the voluntary liquidation,appoint Kenya Deposit Insurance - Corporation to undertake the voluntary liquidation. - (5) Where the Central Bank approves an application by an institution under this section,the institution shall, with effect from the date of approval,cease all its operations except such activities as are incidental to the orderly realization,conservation and preservation of its assets and settlement of its obligations. - (6) Where an institution goes into voluntary liquidation under this section- - (a) the liability of the shareholders of the institution for uncalled subscriptions to the capital stock of the institution shall continue until the end of the Cap.487C. Voluntary liquidation. ## liquidation process;and - （b) the institution shall first discharge its liability to its depositors and thereafter rank all other creditors in accordance with the provisions of the Companies - Act. - (7) The institution shall provide the Central Bank with all documents,information and access to such records and premises as the Central Bank may request. - 46.（1) Neither the Central Bank nor any officer or appointed, designated or approved by the Central Bank to act on its behalf,under the provisions of this Act shall be liable in respect of any act or omission done in good faith by the Central bank or such officer,employee,manager or other person in the execution of the duties undertaken by him. - (2) The Central Bank shall indemnify any officer, employee,or any other person acting on its behalf who is made liable on acts or omissions done,in good faith,in the discharge of his duties. ## PARTVIII-MISCELLANEOUS PROVISIONS - 47.An institution shall take measures to ensure that existing and potential consumers of its services are adequately protected and such measures shall include - (a) transparency of services; - (b) provision of safe,quality and reliable services; - (c) fair treatment; - (d) prompt and adequate resolution of consumer complaints; - (e) consumer awareness; - (protection of confidential information;and - (g) such other measures as may be prescribed. - 48.(1) Where the Central Bank considers that it is in Declaration of Cap.486. Protection from liability. Consumer protection. - holidays. the public interest that all institutions,or a particular institution should remain closed on a day which is not a public holiday,the Central Bank may,by notice in the Gazette,declare that day to be a holiday for all institutions or for the particular institution,and all institutions or the particular institution shall remain closed on that day. - (2)A bank holiday declared under subsection (1) shall - not necessarily be a public holiday. - (3) Without prejudice to subsection (1),the Central Bank may,on application by an institution or a branch of an institution,authorize,if satisfied that it is necessary to do so,the institution or branch to remain closed on such day or part thereof,or on such days as may be specified in the authorization, subject to such terms and conditions as the Central Bank may impose. - (4) Nothing in this section shall be deemed to affect the provisions of any law in force relating to public holidays. 49. (1) The High Court may, on application made ex parte by the Central Bank or a manager or liquidator appointed by the Central Bank,if it considers it to be in the interests of the depositors of an institution,make an order- - (a) prohibiting the institution from carrying on business;or - (b) staying the commencement or continuance of any action or any proceedings against the institution for a specified period of time on such terms and conditions as the High Court considers reasonable and may extend the specified period up to a total of six months from the beginning of the stay. - (2) Where an order is made under subsection (1) (a),a licence granted under this Act shall be deemed to be suspended. Orders by the High Court. - 50.(1) No person shall use the word "microfinance derivatives or any other words indicating the transaction of microfinance bank business or the equivalent,in the name, object,description or title under which it transacts business in Kenya or make any representation that the person transacts microfinance bank business unless such person is licensed under this Act. - (2) Where a company registered under the Companies Act as a microfinance bank fails to acquire a licence to operate under this Act within a period of one year from the date of such registration,the company shall forthwith cease the use of the words "microfinance bank'in its name. 51. If anything is prescribed under this Act, - Regulations or Guidelines to be done within a specified time,the Central Bank may on its own motion or on an application,on good cause shown,extend time for the doing of such thing notwithstanding that the time may have expired. - 52.Any officer or employee of an institution who fails - to- - (a) take all reasonable steps to secure the compliance - of the institution with this Act; - (b) take all reasonable steps to secure the accuracy and correctness of any statement submitted under this Act;or - （c) supply any information required under this Act to - the Central Bank, commits an offence and shall be liable,on conviction, to a fine not exceedingfive million shillings,or to imprisonment for a term not exceeding three years,or to both. - 53.1) An institution may outsource its non-core activities to a third-party service provider and shall comply with such outsourcing requirements as may be prescribed by the Central Bank. Restriction on use ofwords. Extension of time. Default by officers or employees. Outsourcing of services. - (2) The following activities are deemed core and shall 2. not be outsourced- 3. (a) corporate planning; 4. (b) organization; 5. (c)management and control;and 6. (d) decision-making functions. - (3) An institution shall not outsource any of its noncore activities without the prior written approval of the Central Bank. 8. 54.（1) An institution shall not introduce a new 9. product or service or make any substantial change in the features of an existing product or service without the prior written approval of the Central Bank. - (2) An institution shall not impose or increase its charges on any product or service without the prior written approval of the Central Bank. - (3) The Central Bank may prescribe the conditions to be met before any product or service is changed or a charge on a product or service is imposed. 55. (1) An institution shall, before granting a loan to a borrower disclose all the charges, terms and conditions 13. relating to the loan. - (2) An institution shall disclose to a borrower the total 15. cost of credit before granting the loan or credit facility. - (3) An institution shall give a notice of at least thirty days to its customer before changing any terms and conditions or imposing or increasing any rate of charge. Approval of products and fees. Disclosure of information on loans. - 56.(1) An institution shall not recover from a debtor, with respect to a non-performing loan,more than the - maximum amount specified in subsection (2). - (2) The maximum amount recoverable from a debtor, with respect to a non-performing loan shall be- - (a) the principal owing when the loan becomes nonperforming; - (b) interest,in accordance with the contract between the debtor and the institution,not exceeding the principal owing when the loan became nonperforming;and - （c) expenses incurred in the recovery of any amounts owed by the debtor. - （3) If a loan becomes non-performing and then the becomes non-performing again,the limits in paragraphs (a) and (b) of subsection (2) shall be determined with respect - debtor resumes payments on the loan and then the loan to the time the loan last became non-performing. - (4) This section shall not apply to the limit of any interest accruing after a court order has made an order setting the limit. Provided that the sum ordered by the court does not include the sum affected by the limitation in subsections (1) and (2). - (5) For the purposes of this section- 2. （a)"debtor"includes a person who becomes indebted to an institution because of a guarantee made with respect to the repayment of an amount owed by another person; 3. (b)"loan"includes any advance,credit facility, financial guarantee or any other liability incurred on behalf of any person;and 4. （c) a loan becomes non-performing in such manner as Limit on interest recoveredon defaulted loans. may,from time to time,be stipulated in guidelines prescribed by the Central Bank. - (6) This section shall apply to performing and nonperforming loans existing on the date of commencement of this Act. Provided that where loans became non-performing before this section comes into operation, the maximum amount referred to insubsection （l) shall be the following- - (a) the principal and interest owing on the day this - section comes into operation;and - (b) interest,in accordance with the contract between the debtor and the institution,accruing after the daythis sectioncomes intooperation,not exceeding the principal and interest owing on the - day this section comes into operation; and - (c) expenses incurred in recovery of any amounts - owed by the debtor. 57. (l) Any entity, institution or other person who issues any advertisement,brochure,circular or other document inviting any person to make a deposit which- - （a) falsely represents that the entity,institution or person is authorized to accept deposits or is otherwise licensed under the provisions of this Act;or - (b) is issued contrary to any direction given by the - Central Bank under the provisions of subsection (2), commits an offence. - (2) The Central Bank may, at any time, direct an institution or any person to withdraw, amend or refrain from issuing any document to which subsection (1) applies. 2. 58.(1) A person conducting a non-deposit taking business shall not take any form of deposit or cash collateral from anyperson. False advertising. Prohibition of takingcollateral. - (2) A person who fails to comply with subsection (1) 2. commits an offence and shall be liable,upon conviction to imprisonment for a term not exceeding three years or to a fine not exceeding five million shillings or both. 3. 59.The Central Bank may prescribe fees payable to 4. Central Bank by institutions and their agents under this Act. 5. 60.(1) The Central Bank may prescribe penalties to be paid by institutions which or other persons who,fail or refuse to comply with the Act and any Regulations, guidelines or directions issued by the Central Bank under this Act. - (2) Notwithstanding subsection (1),any institution or person who fails or refuses to comply with any provision of this Act,Regulations or guidelines made thereunder or any direction or order issued by the Central Bank under the Act or those Regulations or guidelines shall be liable to a monetary penalty not exceeding one million shillings in the case of an institution,or one hundred thousand shillings in the case of a natural person. - (3) The Central Bank may prescribe additional penalties not exceeding ten thousand shillings in each case for each day or part thereof during which such failure or refusal continues. 8. （4) The Central Bank may exercise discretion while assessing the monetary penalty and may consider the 9. following factors in determining the amount to impose- 10. (a) nature of the violation; 11. (b) the seriousness of the violation; 12. （c) the nature of the law violated; 13. （d) whether the law violated is meant to protect 14. depositors,creditors or members of the public; 15. (e) whether the violation was deliberate; 16. (f) the amount of financial loss or other losses 17. involved; Fees. Monetary penalties. - (g) the people affected by the violation; - (h) the public interest affected by the violation; - (i) the size of the institution; - (j) the capital position of the institution; - (k) its liquidity status; - (1) whether a harsh penalty will cripple its operations; - （m)whether the institutionhas takenremedial - measures to address the violation;or - （n) any other fact the CBK may consider relevant. - (5) Any monetary penalty payable under this section shall be paid to the Central Bank within such period as the Central Bank may specify. - （6) The Central Bank may, subject to prior notice to the institution, debit the account of the institution held by the Central Bank if the institution fails to pay any monetary penalty ordered or imposed under this section. - 61.A person who commits an offence under this Act for which no penalty is stipulated shall be liable, on conviction,to a fine not exceeding two million shillings,or to imprisonment for a term not exceeding one year,or to both. ## PART IX-PROVISIONS ON DELEGATED POWERS - 62.(1) The Central Bank may issue regulations- - (a) prescribing any matter which under this Act may be prescribed by the Central Bank;and - (b) for the implementation of any provision of this - Act. - (2) Without prejudice to the generality of subsection (1), Regulations made under that subsection may provide for- - （a) the manner of selection and qualification of the monitoring and evaluation staff; - (b)minimum standards on equipping of offices; General penalty. Regulations - （c)procedures for handing over of offices;and - （d) any other matter required under the Constitution, this Act and any other written law. - (3) The principles and standards applicable to the - delegated power referred to under this Act are those found in- - （a) the Statutory Instruments Act; - (b) the Interpretation and General Provisions Act; - （c) the general rules of international law as provided under Article 2(5)of the Constitution;and - （d) any treaty and convention ratified by Kenya under Article 2(6) of the Constitution. ## PARTX-REPEAL,SAVINGS AND TRANSITIONALPROVISIONS - 63.(1) The Microfinance Act, Cap.493C is repealed. - (2) Notwithstanding subsection (l),where upon the commencement of this Act,any institution that was licensed to conduct microfinance bank business under the repealed Act, that licence shall have effect as if granted under this Act. - (3) Anything which was lawfully commenced,done or executed under the authority of the Microfinance Act,2006 shall continue to be valid and shall be continued with under this Act as if it was originally commenced,done or executed under this Act. Cap.2A. Cap.2. Repeal and savings of Cap. 493C. Cap.493C. ## FIRST SCHEDULE (13(1),(2)) ## MINIMUM CAPITALREQUIREMENTS Every institution shall, at all times,maintain minimum capital ratios indicated below or such other ratios as may be determined by the Central Bank- - （a) a core capital of not less than ten per cent of total risk-adjusted assets plus risk adjusted off balance sheet items as may be determined by the Central Bank; - (b) a core capital of not less than eight per cent of its total deposit liabilities; - (c) a total capital of not less than twelve per cent of its total riskadjusted assets plus risk-adjusted off balance sheet items as may be determined by the Central Bank;and - （d) a core capital of at least two hundred and fifty million shillings to - be realized by within five years of the commencement of this Act. ## SECOND SCHEDULE (S.38(6)(a),41(2) ## COMPETENTAUTHORITIES - (a) Central Bank of Kenya; - (b) Capital Markets Authority; - （c) Financial Reporting Centre; - (d) Communications Authority of Kenya; - (e) Insurance Regulatory Authority; - (f) Retirement Benefits Authority; - (g) SACCO Societies Regulatory Authority. ## MEMORANDUM OFOBJECTS AND REASONS The objective of this Bill is to repeal and replace Microfinance Act, 2006,to address the evolving business of banking as well as the institutions offering microfinance banking services.The Bill therefore seeks to provide a safe and sound environment for the MicrofinanceBanks to meet the evolving needs of the consumers they serve. This is in line with section 4(2) of the Central Bank of Kenya (CBK) Act,which mandates CBK to foster the liquidity,solvency and proper functioning of a stable market-based financial system. - Part I (Clauses 1 to 3) provides for preliminary matters. Clause 1 provides for the short title,clause 2 provides for definition of terms used in the Bill,while clause 3 provides for the institutions to which the Bill - applies. - Part II (Clauses 4 to 12) contains the licensing provisions. Clause 4 clauses 5 to 8 provide for the microfinance bank licensing process and classes of microfinance bank business,clause 9 provides for the powers of the Central Bank of Kenya to enter and examine premises suspected of carrying out microfinance bank business contrary to the law. Clause 10 to 12 provides for grounds and procedure of revocation of a microfinance bank's licence,restrictions on the ownership of a microfinance bank's share capital,and the processof amalgamation,acquisition and transfer of assets and liabilities ofmicrofinance banks. - Part Ill (Clauses 13 to 22) contains provisions relating to the operations of microfinance banks.Clauses 13 and 14 provide for minimum capital requirements and ratios,clause15providesforminimum liquid assets. Clause 16 requires institutions to put in place sound risk management measures and clause 17provides for approval of institutions places of business. Clauses 18 provides for activities that institutions are prohibited from undertaking,clause 19 contains restrictions on declaration of dividends,clause 20 provides for limits on loans and credit facilities by institutions,clause 21 contains restrictions on insider loans,while clause 22 provides for restrictions on the transfer of an institution's shares. - Part IV (Clauses 23 to 25) provides for corporate governance of - microfinance banks. Clause 23 prohibits significant shareholders from the management of a microfinance bank,clause 24 provides for board composition ofmicrofinance banks,while clause 25 provides for duties of directors. - Part V (Clauses 26 to 34) provides for accounts and audit. Clause 26 - provides for the financial year of institutions,clauses 27 and 28 provides for the format of preparation of accounts,clause 29 provides for submission of accounts to the Central Bank of Kenya,clauses 30 to 32 provide for the appointment and roles of auditors, clause 33 provides for exhibition and publication of accounts by microfinance banks,while clause 34 provides for rectification of accounts. Part VI (Clauses 35 to 37) provides for information and reporting obligations of institutions.Clause 35 provides for submission of information and returns to the Central Bank of Kenya,clause 36 provides for notification of new developments to the Central Bank of Kenya,while clause 37 provides for publication and sharing of information relating to microfinance banks. Part Vll (Clauses 38 to 46) provides for supervision of institutions by the Central Bank of Kenya. Clause 38 provides for inspection of institutions, clause 39 provides for examination of microfinance banking groups, clause 40 provides for the power of the Central Bank of Kenya to advise and direct institutions,clause 4l empowers the Central Bank of Kenya to appoint competent authorities to enforce its directives,clause 42 obligates institutions to provide the Central Bank of Kenya with online access to their systems,clauses 43 and 44 provides for the powers of the Central Bank of Kenya to intervene in the affairs of an institution, clause 45 provides for voluntary liquidation of institutions with the approval of the Central Bank of Kenya,while clause 46 protects the Central Bank of Kenya and its officers from liability for acts done in good faith in the discharge of their duties. Part VIll (Clauses 47 to 61) provides for miscellaneous matters. Clause 47 provides for consumer protection,clause 48 provides for declaration of holidays,clause 49 provides for orders of the High Court restricting an institution's business,clause 50 provides for restriction on the use of the words "microfinance bank"and its derivatives. Clause 51 provides for extension of time. Clauses 52provides for penalty for default by officers or employees of an institution. Clauses 53 to 56 provide for outsourcing, approval of products and services,and for disclosure of information on loans and limits the interest recoverable on defaulted loans. Clauses 57 to 58 criminalize false advertising and prohibit nondeposit taking entities from taking deposit or cash collateral. Clauses 59 to 61 authorize the Central Bank of Kenya to prescribe fees payable to the Bank,empower the Central Bank of Kenya to prescribe penalties for noncompliancewith the Act and providesforgeneral penaltyfor contravention of the Act. Part IX (clause 62) Clause 62 empowers the Central Bank of Kenya to prescribe regulations. Part X (clause 63) provides for the repeal of the Microfinance Act, 2006 and transitional matters. The First Schedule provides for minimum capital requirements for institutions. The Second Schedule provides for a list of competent authorities that may be appointed to enforce the Central BankofKenya's directives. Statement on the delegation of legislative powers and limitation of fundamental rights and freedoms The Bill delegates powers to the Central Bank but it does not limit anyfundamental rights and freedoms. Statement as to whether the Bill is a money Bill within the meaning of ## Article 114 of the Constitution The enactment of this Bill may occasion additional expenditure of public funds ## Statement as to whether the Bill concerns county governments The Bill is not a Bill concerning county governments in terms of Article 1lo（l) (a) of the Constitution as it does not contain provisions affecting the functions and powers of the county governments as set out in the Fourth Schedule to the Constitution. Dated the24th February,2026. KIMANIICHUNG'WAH, Leader of Majority Party