KENYA Law and Practice Contributed by: Sammy Ndolo, Njeri Wagacha, Brian Muchiri and Sara Ndei, Cliffe Dekker Hofmeyr incorporating Kieti Law LLP
5. Payment Processors 5.1 Payment Processors’ Use of Payment Rails
• the invitation extends beyond a small, prede - fined group of investors; or • the structure of the offer allows for securities to be transferred to individuals who were not the initial targets. 4.4 Syndication of Fiat Currency Loans Syndication of loans is not common in Kenya and there are no prescribed regulations govern - ing such activity. However, the syndication pro - cess is typically as follows. • Origination – a borrower identifies a sig - nificant funding need. They choose a lead arranger, typically an experienced investment bank or commercial bank, to organise the syndication. • Details and negotiation – the lead arranger assists the borrower in creating a detailed information package about its business and financial health. This is used to negotiate core loan terms like the amount, interest rates and repayment plans. • Finding partners – the lead arranger strategi - cally approaches other banks or investors, inviting them to join the lending group (the syndicate). These potential partners carefully review the company’s information and evalu - ate the risk. • Commitments and contracts – interested lenders decide how much of the loan they are willing to fund. The terms are fine-tuned and a comprehensive loan agreement is drawn up, legally binding all parties. • Funding and beyond – upon signing the agreement, the lead arranger releases the funds to the company. Often, a specific bank is appointed to manage the loan on behalf of everyone in the syndicate and ensure the bor - rower adheres to the agreed-upon terms.
Payment processors can use existing payment rails or can create or implement new payment rails. To operate in Kenya, a payment processor would first need to be authorised as a PSP by the CBK under the NPS Act. Under the NPS Act, a PSP is an entity that: • sends, receives, stores or processes pay - ments or provides other services through any electronic system; • owns, possesses, operates, manages or controls a public switched network for the provision of payment services; or • processes or stores data on behalf of PSPs or users of payment services. Upon authorisation, a PSP would be able to make use of existing payment rails to facilitate payments between customers in Kenya, sub - ject to any conditions imposed by the CBK in its authorisation. 5.2 Regulation of Cross-Border Payments and Remittances Cross-border payments and remittances are regulated the Money Remittance Regulations, under which any person who wishes to under - take “money remittance business” is required to obtain a licence from the CBK. “Money remittance business” is defined in the Money Remittance Regulations as a service for the transmission of money or any representa - tion of monetary value without any payment accounts being created in the name of the payer or the payee, where:
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