Kenyans Risk Civil Jail as Loan Apps Deploy Courts to Hunt Down Defaulters
You thought unpaid mobile loans in Kenya had been forgotten? Think again. Defaulters could soon find themselves in court — or even in civil jail — for as little as KSh 3,000.
Lawyer Elizabeth Gesare says mobile loan companies are now working with debt collection firms to pursue borrowers through the legal system. These collectors are filing cases in small claims courts to get money from defaulting clients.
“Once judgment is issued, enforcement can take many forms — from warrants of arrest, attachment and sale of property, or even garnishing salaries. But I have not seen these apps fully implement such measures,” Gesare told TUKO.co.ke in an interview.
Court Rulings Complicate Debt Recovery
Despite these aggressive moves, Gesare says digital lending apps face a big legal hurdle. The High Court has already ruled that many of these lenders are not compliant with Kenya’s financial laws, making it illegal for them to sue their clients directly.
“That’s why they hide behind collection agencies which themselves lack the legal authority to file cases on behalf of third parties,” she explained.
Central Bank Steps In
The industry has been under the spotlight since the Central Bank of Kenya (CBK) Act was amended in December 2024. The law replaced the term “digital credit business” with “non-deposit-taking credit providers (NDTCs),” bringing loan apps under CBK’s regulation.
According to the CBK 2022 regulations, all digital credit providers must now get proper licenses, moving beyond the simple registration that previously allowed many to operate unchecked.
Rising Concerns Over Debt Collection Methods
Mobile lending has raised concerns in Kenya, especially on the harsh recovery methods used against struggling borrowers. This has led to calls for tighter regulation to protect consumers from exploitation while still holding defaulters accountable.
With courts, regulators and loan apps now at war over enforcement, many borrowers are in limbo.
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Kenyans Risk Civil Jail as Loan Apps Deploy Courts to Hunt Down Defaulters