Kenyan MPs Propose Loan Cap to Protect Borrowers
Kenyan lawmakers are considering a new law to protect borrowers from runaway loan costs. The proposal would make it illegal for borrowers to pay more in interest than the amount they originally borrowed.
At the center of the debate is the in duplum rule, which already exists in law but has been inconsistently enforced. This rule stops lenders from charging more than the loan principal in interest.
What This Means in Practice
If you borrow KES 100,000, lenders would not be able to charge more than KES 100,000 in interest, regardless of how long the loan is overdue. This prevents borrowers from sinking into debt traps where the repayment balloons endlessly.
Here’s how loans would look under the proposed reform compared to today’s system:
| Scenario | Under Today’s Looser System | Under the Proposed Interest Cap / In Duplum Rule |
|---|---|---|
| You borrow KES 100,000 | Interest and penalties may keep piling on, possibly surpassing KES 100,000, so you could end up owing much more than you borrowed. | Once unpaid interest reaches KES 100,000 (equal to the loan), no new interest can be added until part of the principal is cleared. |
| Late payments / default | Lenders can charge harsh penalties, late fees, or higher interest, compounding aggressively. | Penalties and fees must be clearly defined; lenders are limited in how much extra they can add beyond the principal. |
| Restructuring / extending the loan | Lenders may “reset” the loan terms and reapply high interest, trapping borrowers in cycles of debt. | The law would clarify that the “no more interest” cap applies even if the loan is restructured. |
| Recovering overcharges | Borrowers struggle to challenge excessive charges due to unclear legal interpretations. | Borrowers gain clearer legal grounds to recover money if overcharged. |
Why It Matters
- Prevents debt traps – Borrowers won’t see their loans snowball to double or triple the original amount.
- Protects against hidden charges – Lenders won’t be able to disguise penalties and fees as unlimited interest.
- Encourages fair lending – Clear rules improve trust and transparency in Kenya’s credit market.
The Bigger Picture
This proposal especially targets exploitative practices by informal and digital lenders, where interest and penalties often spiral out of control. If passed, it could bring relief to many Kenyans struggling with debt, while also forcing lenders to rethink their business models and operate more transparently.
