The Central Bank of Kenya has published the draft Credit Guarantee Business Regulations, 2025 for public consultation. If adopted, these regulations will for the first time bring all credit guarantee providers under CBK supervision. Our analysis below is based on the draft as issued and may change once the final text is gazetted.
Kenya’s Experience with Credit Guarantees
Kenya’s guarantee landscape has developed over time through the National Treasury’s SME Credit Guarantee Scheme launched in 2020, through multilateral and development finance programmes such as African Guarantee Fund, GuarantCo, ATI, IFC and USAID’s Development Credit Authority, and through internal guarantee products within some banks for SME and agribusiness portfolios. These arrangements have existed without a unified prudential framework and have relied on contractual structures and donor mandates.
Why CBK is Intervening
The policy objective is to enhance financial stability, ensure standardisation and transparency, protect borrowers who indirectly rely on guarantees, and provide policymakers with reliable data to guide credit policy. Guarantees create contingent liabilities that can transmit stress to lenders when poorly structured or undercapitalised, so a clear supervisory framework is intended to anchor prudence and market confidence.
What the Draft Requires
The draft sets demanding conditions that mirror bank-like prudence. Providers will need at least one billion shillings in core capital and must observe capital adequacy ratios. Shareholding by any single investor is capped at a quarter unless the entity is a public body or multilateral development bank. Boards must be majority non-executive and supported by audit, risk and guarantee committees. Directors and senior officers are subject to strict fitness and probity standards. Guarantee portfolios are to be classified and provisioned in line with CBK rules and IFRS. Providers must comply with the Data Protection Act and anti-money-laundering obligations. A five-year transition applies once the regulations come into force.
Policy Trade-Offs
The framework should strengthen credibility and reassure banks and SACCOs that counterparties are sound, which in turn can unlock lending to SMEs, agribusiness and climate-linked projects. The trade-off is a higher bar to entry that will challenge smaller donor-backed schemes and innovative start-ups, and a rise in compliance costs that may be passed to borrowers in the short term. Bank subsidiaries that run guarantee operations may need to restructure, recapitalise or seek separate licences.
What to Expect in the Market
If the regulations are passed, the market is likely to consolidate around a smaller group of well-capitalised providers such as African Guarantee Fund, GuarantCo and ATI. Development finance institutions may negotiate targeted exemptions or formalise their presence through locally licensed vehicles. Banks with internal guarantee products will need to regularise those arrangements through licensing. Fintechs and digital lenders are likely to pivot to partnership models with licensed guarantors. Thematic guarantees in climate finance, digital credit portfolios and regional trade are expected to grow as confidence builds.
Winners and Losers
Large multilateral and bank-backed providers with the capacity to meet CBK thresholds are positioned to benefit. Banks and SACCOs gain stronger counterparties. SMEs should see more reliable access to guaranteed credit once the market adjusts. Smaller schemes, under-capitalised subsidiaries and early-stage innovators are most exposed to the new bar, and borrowers may face higher costs in the near term while compliance embeds.
Consultation Details and Timing
CBK has invited public comments on the draft Regulations. The deadline for submissions is Wednesday, October 15, 2025. Stakeholders can submit feedback through the online form and by the channels indicated in the CBK notice. Organisations with existing guarantee arrangements, including bank subsidiaries and multilateral programmes, should review their structures now and prepare representations within the consultation window.
Cavendrys Commentary: Cavendrys views this reform as both a compliance moment and a strategic opening. If the regulations are adopted, banks with guarantee subsidiaries will need licensing strategies, governance enhancements and portfolio-level provisioning policies that pass prudential scrutiny. Multilateral and development finance institutions such as IFC, USAID, AfDB and FMO will benefit from structuring that preserves their mandates while aligning with CBK oversight. Their team combines financial services regulation, fintech structuring, data governance and market execution experience across East Africa. Cavendrys can help bank affiliates design ring-fenced guarantee vehicles, prepare licence packs, set up risk and audit committees, and calibrate IFRS and CBK provisioning. They also support DFIs to document local partnerships, negotiate tailored exemptions where appropriate, and operationalise reporting that satisfies both donor and prudential expectations.
For decision makers, the next five years will be decisive. Those who move early to align with the framework will secure compliance, build lender confidence and position themselves to scale guarantee solutions that expand access to credit. Cavendrys stands ready to advise on restructuring options, licence readiness, governance design and market positioning for the new regime.
Important: This advisory is based on the draft regulations. Final obligations may change once CBK issues the final text.
To discuss how these proposals may affect your organisation or to prepare a submission during the consultation window, please contact Cavendrys. They act for bank subsidiaries that provide guarantees and for multilateral programmes operating in Kenya, and can support you from strategy through licensing and implementation.
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