NAIROBI, Kenya – A significant change in the microfinance sector is set to protect borrowers from abusive debt collection practices.
As of January 1, 2025, the Business Laws (Amendment) Bill, 2024, which amended the Microfinance Act, has officially taken effect, making it illegal for non-deposit-taking microfinance lenders to harass borrowers during debt recovery.
Under the new law, lenders are prohibited from using threats, violence, or any unlawful means to collect debts.
Additionally, the use of obscene or profane language towards borrowers or their guarantors is strictly forbidden.
The legislation not only bans harassment but also mandates transparency and accuracy in communication.
Lenders must provide borrowers with clear information about loan terms, financial costs, and procedures for debt recovery.
They are also required to maintain borrower confidentiality.
This law comes in response to growing concerns about the harsh debt recovery tactics employed by some digital lenders, which have been described as “cruel.”
Reports have surfaced of borrowers receiving threatening messages for missing payments by as little as one day.
To curb these practices, the amendment expands the Central Bank of Kenya (CBK)’s regulatory mandate to include oversight of non-deposit-taking credit providers such as digital lenders, peer-to-peer lenders, and credit guarantee businesses.
This shift aims to promote fair practices, ensure financial stability, and enhance consumer protection through stricter oversight, licensing, and credit information sharing.
The Bill also transfers the regulation of non-deposit-taking microfinance businesses from the Microfinance Act to the CBK Act, introducing new transparency requirements such as the disclosure of all credit costs and borrower rights.
The comprehensive Business Laws (Amendment) Bill, 2024, spearheaded by the Leader of the Majority Party, Hon. Kimani Ichung’wah, amends nine Acts of Parliament.
These include the Banking Act, Central Bank Act, Microfinance Act, and several others, aiming to enhance regulatory oversight, streamline processes, and foster economic stability.
As of January 1, 2025, the Business Laws (Amendment) Bill, 2024, which amended the Microfinance Act, has officially taken effect, making it illegal for non-deposit-taking microfinance lenders to harass borrowers during debt recovery.
Under the new law, lenders are prohibited from using threats, violence, or any unlawful means to collect debts.
Additionally, the use of obscene or profane language towards borrowers or their guarantors is strictly forbidden.
The legislation not only bans harassment but also mandates transparency and accuracy in communication.
Lenders must provide borrowers with clear information about loan terms, financial costs, and procedures for debt recovery.
They are also required to maintain borrower confidentiality.
This law comes in response to growing concerns about the harsh debt recovery tactics employed by some digital lenders, which have been described as “cruel.”
Reports have surfaced of borrowers receiving threatening messages for missing payments by as little as one day.
To curb these practices, the amendment expands the Central Bank of Kenya (CBK)’s regulatory mandate to include oversight of non-deposit-taking credit providers such as digital lenders, peer-to-peer lenders, and credit guarantee businesses.
This shift aims to promote fair practices, ensure financial stability, and enhance consumer protection through stricter oversight, licensing, and credit information sharing.
The Bill also transfers the regulation of non-deposit-taking microfinance businesses from the Microfinance Act to the CBK Act, introducing new transparency requirements such as the disclosure of all credit costs and borrower rights.
The comprehensive Business Laws (Amendment) Bill, 2024, spearheaded by the Leader of the Majority Party, Hon. Kimani Ichung’wah, amends nine Acts of Parliament.
These include the Banking Act, Central Bank Act, Microfinance Act, and several others, aiming to enhance regulatory oversight, streamline processes, and foster economic stability.
