Inside MPs' plan to free Kenyans from clutches of rogue lenders

Parliament has launched a landmark effort to free millions of Kenyan borrowers from the grip of the debt yoke, following a public petition that calls for new legislation to curb predatory lending.  

The move, triggered by a public petition, sets the stage for a bruising battle between lawmakers and the powerful lending industry, including banks, financial institutions, and unregulated lenders known as shylocks, who have profited from a national debt crisis. 

The legislative push, triggered by a public petition conveyed to the National Assembly, seeks to impose a strict cap on debt repayments.  

The proposed law would entrench the “in duplum” rule, a legal principle meaning “in double,” into the Consumer Protection Act.

This would ensure that the total interest and penalties on a defaulted loan can never exceed the original amount borrowed. 

The move would effectively shield consumers from predatory lending, beginning a legislative process to codify a rule that would prevent loan interest and penalties from accumulating beyond the original principal amount. 

The petition, filed by lawyer Allen Waiyaki Gichuhi, calls on Parliament to amend the Consumer Protection Act to entrench the “in duplum” rule, a legal principle that caps debt.  

National Assembly Speaker, Moses Wetangula, last week confirmed the House had  received the public petition from Mr Waiyaki Gichuhi of Wamae & Allen Advocates.

The Speaker told the House that the matter raised in the petition is well within the authority of Parliament and is not pending before any court or legal body.  

Consequently, he committed the petition to the Public Petitions Committee for consideration. The committee is required to consider the petition and report its findings to the House and to the petitioner.  According to the petition, the rule’s purpose is to “protect borrowers from exploitation, prevent endless accumulation of interest, and encourage fair lending practices.” 

The legislative push follows a series of exclusive reports by The Standard that have highlighted the depth of a debt crisis gripping ordinary Kenyans.  

These reports have unveiled a stark picture of an economy where survival is increasingly financed on credit, with millions of families skipping meals to service loans and borrowers driven to depression by relentless collectors.  

The crisis has been underlined by a surge in non-performing loans to a record Sh697.29 billion. 

Despite a version of the rule existing in the Banking Act, Gichuhi’s petition states that “many borrowers continue to suffer from banks, financial institutions, unscrupulous lenders and shylocks charging interest and penalties beyond the principal loan amount.”  These practices, it adds, have “resulted in violation of consumer rights under Article 46 of the Constitution” and have “exposed Kenyans to unfair deprivation of property.” 

The petition highlights “inconsistent judicial interpretations on the scope and timing of application of the rule” and questions whether penalties or default charges count as “interest.”  

This lack of clarity, the petitioner argues, leads to “harassment of borrowers by debt collectors even after repayment obligations have exceeded the statutory threshold.” 

For millions of Kenyans like Mercy Njeri, a civil servant from Naivasha, the move is a potential lifeline. Her story, echoed in countless households, is one of a small Sh5,000 loan spiralling into an inescapable trap, with threats from collectors and her salary consumed by debt even before she receives it.  “They threaten you, they call your friends, they have no mercy,” Njeri told The Standard.

“When I heard about this new law, I felt hope I haven’t felt in years. Maybe someone has finally heard our cries.” 

The petition puts regulators such as the Central Bank of Kenya (CBK) on the spot and extensively details the failure of the current system, arguing that despite the existence of a version of the in duplum rule in the Banking Act, its application is weak, inconsistent, and full of loopholes that lenders exploit. 

“Despite the existence of this law, many borrowers continue to suffer from banks, financial institutions, unscrupulous lenders and shylocks charging interest and penalties beyond the principal loan amount,” the petition states. It adds that these practices have resulted in the “violation of consumer rights under Article 46 of the Constitution and have exposed Kenyans to unfair deprivation of property.” 

The petition highlights a key technical flaw in the current legal framework: inconsistent judicial interpretations on the scope and timing of the rule’s application.

It questions “whether penalties, default charges, and other costs in addition to interest” count toward the cap. This lack of clarity and enforcement, the petition argues, “undermines public confidence in the (Kenyan) financial sector and violates national values under Article 10, especially transparency, accountability, and social justice.” 

The data from regulators confirms the crisis. CBK reports that a shocking 83.1 per cent of digital loans under Sh1,000 are in default, revealing a population borrowing tiny sums for daily survival only to be crushed by the terms. 

Another report by the Digital Financial Services Association of Kenya showed that Sh13 billion is loaned digitally each month, much of it for food, underscoring a desperate cycle of borrowing for basic consumption. Kenya is not alone in seeking legislative solutions to predatory lending. The petition’s sponsors and supporting lawmakers are expected to draw on successful international precedents to make their case.  In South Africa, the National Credit Act enforces a strict in duplum rule, capping interest and fees at double the principal.  

The law is widely credited with providing a clear legal framework for debt restructuring and protecting consumers from indefinite debt accumulation. 

Within the European Union, while not a uniform in duplum rule, the EU’s Consumer Credit Directive mandates clear, transparent pricing and gives member states the power to impose interest rate caps to prevent usury, a principle that aligns with the goals of the Kenyan petition. 

In the United States, many states have usury laws that set maximum allowable interest rates, functioning as a de facto cap on debt growth. 

These precedents provide a blueprint for Kenya, but analysts say the path to implementation is fraught with challenges. The lending industry, which has enjoyed years of minimal regulation and soaring profits, is expected to mount a fierce lobbying campaign against the bill. 

“The shylocks are not just loan sharks on street corners; they are sophisticated, well-funded operations with deep pockets and political influence,” said a Nairobi-based financial analyst who requested anonymity to speak freely.

“They will fight this tooth and nail because it strikes directly at their business model, which is based on perpetual debt.” 

The petition itself seems to anticipate this resistance. It frames the issue not just as a financial matter, but as a constitutional one, arguing that the current situation “undermines public confidence in the financial sector and violates national values under Article 10, especially transparency, accountability, and social justice.” 

The petition, which Parliament has found to be a matter well within its authority and not pending before any court of law, has been officially committed to the Public Petitions Committee.  

The committee is required to consider the petition, call for public testimony, and report its findings to the House. The process will be a critical test of whether Parliament can withstand the pressure from industry lobbyists and prioritise the plight of its constituents.  “I pray this time it is different,” said Mercy Njeri, her voice a mix of hope and exhaustion. “We are tired of being scared. We are tired of being poor because of a small loan. Let them pass this law and set us free.” 

The coming legislative battle will determine whether Kenya’s borrowers are granted that freedom, or if the shylocks, once again, prove too rich and too powerful to tame.