Kenya proposes up to $1.93m capital requirement for payment firms

Kenya is proposing new minimum capital requirements of up to KES 250 million ($1.93 million) for payment companies, a move that could raise the financial threshold for fintechs seeking to enter and compete in the country’s payments market.

Under the proposed National Payment System Bill, 2026, the Central Bank of Kenya (CBK) would introduce mandatory minimum capital requirements ranging from KES 5 million ($38,610) for basic payment data services to KES 250 million ($1.93 million) for electronic money issuers.

Existing payment service providers would have one year from the enactment of the law to comply with the new capital requirements, subject to guidelines issued by the CBK.

The proposed framework could increase the barriers facing early-stage and bootstrapped fintechs, particularly as the bill excludes shareholder loans, convertible debt and other borrowed funds from qualifying as core capital.

Commercial banks, meanwhile, would retain a structural advantage, benefiting from existing capital reserves and a simplified authorisation framework under the proposed rules.

“Each licence issued under this Act shall be subject to the condition that the licensee shall at all times maintain the minimum core capital prescribed under this Act and regulations,” the bill states.

Capital requirements vary by payment licence

The proposed National Payment System Bill establishes different minimum core capital thresholds based on the type of payment service or system operated by an entity.

The lowest requirement would be KES 5 million ($38,600), while the highest would be KES 250 million ($1.93 million), creating a 50-fold difference between the two ends of the proposed framework.

An Electronic Money Issuer Payment Service Provider would face the highest requirement at KES 250 million ($1.93 million).

Four categories would require KES 50 million ($386,100) each: Merchant Acquirer PSPs, Electronic Wallet Provider PSPs, Card Scheme Operators and Payment Switching and Clearing System Operators.

The proposed requirements for other categories are:

• Money Remittance Service Provider: KES 30 million ($231,700)
• Payment Messaging System Operator: KES 20 million ($154,500)
• Payment Gateway: KES 10 million ($77,200)
• Payment Initiation Service Provider: KES 5 million ($38,600)
• Account Information Service Provider: KES 5 million ($38,600)

The bill also proposes additional capital requirements for businesses operating across multiple licence categories.

Under the framework, a payment service provider or payment system operator would be required to maintain 100% of the capital applicable to its highest-capital licence category, plus 50% of the prescribed requirement for every additional licence category.

For example, an entity operating as both an Electronic Money Issuer and an Electronic Wallet Provider would need KES 275 million ($2.12 million) in core capital.

“Where a payment service provider or payment system operator intends, or has been licensed, to carry on business under more than one licence category, the payment service provider or payment system operator shall hold the amount of minimum capital applicable to the highest-capital category and fifty per cent of the prescribed minimum capital applicable to the additional license category,” the bill states.

Borrowed funds excluded from core capital

The proposed legislation sets strict parameters around what qualifies as core capital for licensed payment firms.

Core capital would consist of fully paid-up ordinary share capital and disclosed reserves. However, the bill specifically excludes several forms of funding that early-stage companies might otherwise use to meet capital requirements.

“The following shall not constitute paid-up capital: unpaid, partly paid, or contingent capital commitments; shareholder loans or advances; capital raised through borrowed funds, whether directly or indirectly; or revaluation reserves or internally generated intangible assets,” the bill states.

The provision means fintechs would need to rely substantially on genuine equity capital and disclosed reserves rather than shareholder financing, debt or other borrowed funds to satisfy the proposed thresholds.

For smaller and emerging payment companies, this could make the fundraising process more significant as they seek to secure the capital needed for full licensing.

Regulatory sandbox to support payment innovation

The bill proposes a regulatory sandbox aimed at allowing firms to test new payment products and business models under regulatory supervision.

The sandbox would enable companies to live-test innovative payment solutions without first obtaining a full licence or raising the entire upfront capital requirement associated with a permanent licence.

The approach is intended to create room for payment innovation while allowing the CBK to assess emerging products, technologies and business models before they enter the wider market.

Commercial banks, microfinance institutions and state-owned enterprises would continue to have a structural advantage under the proposed framework. These institutions would require CBK authorisation rather than a full payment licence, provided they satisfy applicable capital adequacy requirements.

The proposed capital regime therefore seeks to strengthen financial safeguards across Kenya’s payment ecosystem while establishing differentiated entry requirements based on the nature and risk profile of each payment service.