A Turning Point for Buy-Now-Pay-Later (BNPL) Models in Kenya: The Administration of Lipa Later Limited
Company Lipa Later Forced into Administration Due to Inability to Secure Fresh Finances
In a significant development for Kenya's financial landscape, Lipa Later Limited, a prominent digital consumer credit provider, has been placed under administration. This move, which took effect on March 24, 2025, has raised questions about the sustainability of BNPL models in Kenya's credit market.
The Administration Process
Joy Vipinchandra Bhatt of Moore JVB Consulting has been appointed to oversee the operations of Lipa Later. Bhatt's appointment follows Kenya's Insolvency Act, and her role involves managing the company's business, assets, and management. The directors of Lipa Later no longer have the authority to transact or manage assets without Bhatt's approval.
The Impact on Stakeholders
The exact reasons for Lipa Later's financial distress are not specified in the available information. However, the move indicates financial distress for the BNPL firm. The impact of this administration on Lipa Later's customers and partners is not discussed in the article. Creditors have until April 23, 2025, to submit claims against the company.
The State of BNPL in Kenya
Despite this setback, the BNPL market in Kenya is expected to continue growing. The Central Bank of Kenya (CBK) has proposed the Draft Non-Deposit Taking Credit Providers Regulations, 2025, which aims to regulate the BNPL industry by bringing non-deposit taking businesses under its oversight. These regulations suggest that businesses offering BNPL services must obtain a license with an initial capital requirement of KES 20 million.
Market Growth and Challenges
Kenya's BNPL market is projected to reach KES 152 billion by this year and KES 240 billion by 2030, growing at an annual rate of 13.6%. However, the industry faces challenges such as high interest rates charged to consumers, which have led to accusations of exploitation. The proposed regulations aim to address these issues by enforcing stricter guidelines on lending practices.
Business Practices and Consumer Impact
BNPL services in Kenya, such as SizaPay, offer consumers the convenience of purchasing products like Starlink devices with flexible payment plans. While these services carry risks such as interest charges and late payment penalties, which can impact consumer credit scores, they also provide opportunities for consumers to access credit.
Future Implications
The regulatory environment will likely lead to greater transparency and protection for consumers, potentially reducing the risk of exploitation by BNPL providers. Small players may struggle to meet the licensing requirements, leading to market consolidation and potentially increased competition among larger, licensed providers.
Technological advancements, such as the integration of AI and digital platforms in microfinance and BNPL, could enhance credit assessment and repayment processes, making these services more accessible and efficient. The regulation of BNPL may stabilize the industry, providing more opportunities for consumers to access credit while promoting responsible lending practices.
The future of BNPL in Kenya will be characterized by increased regulation, consumer protection, and technological innovation, which could lead to a more stable and inclusive credit market. The Lipa Later administration serves as a reminder of the need for responsible lending practices and the importance of regulatory oversight in the BNPL industry.
[1] Source: Central Bank of Kenya (CBK) [2] Source: SizaPay [4] Source: Financial Sector Deepening Kenya (FSD Kenya)
The appointment of Joy Vipinchandra Bhatt to oversee the operations of Lipa Later, a prominent digital consumer credit provider, indicates a significant intervention in the business sector, specifically in the technology-driven finance industry. With Bhatt managing the company's business, assets, and management, questions about the sustainability of business models, such as Buy-Now-Pay-Later (BNPL), in Kenya's credit market are raised, given Lipa Later's financial distress.
As the Kenyan Central Bank proposes regulations for BNPL, aiming to address high interest rates and enforce stricter guidelines on lending practices, the future of BNPL is expected to be characterized by increased regulation, consumer protection, and technological innovation, leading to a more stable and inclusive credit market. The administration of Lipa Later, despite marking a turning point for BNPL models in Kenya, provides a reminder of the need for responsible lending practices and the importance of such regulatory oversight in the BNPL industry.
