- MPs have backed a proposal to extend the in duplum rule to Saccos, digital lenders and microfinance institutions, though Parliament has not yet passed the change.
- The proposal would cap interest on defaulted loans at the outstanding principal, protecting borrowers from excessive charges.
- If approved by Parliament, the amendment would extend protections currently available only to bank borrowers under the Banking Act.
Kenyans who borrow from Saccos, digital lenders and microfinance institutions could soon get protection from runaway interest charges, after a National Assembly committee backed a petition extending the in duplum rule beyond banks. Parliament has not yet passed the change.
The in duplum rule limits interest on a defaulted loan to an amount equal to the outstanding principal. For a Sacco member who defaults on a Ksh10, 000 loan, for example, this would cap the total interest recoverable at Ksh10, 000, preventing the debt from growing indefinitely.
Currently, the rule exists only under Section 44A of the Banking Act, which applies to institutions licensed under that law. Because Savings and Credit Co-operative Organisations (Saccos) fall outside this definition, members who default on loans have lacked the same statutory protection as bank customers, even though Saccos are a primary source of credit for many Kenyans.
The National Assembly Public Petitions Committee has now adopted a petition filed by Allen Waiyaki Gichuhi, a senior counsel, calling for this gap to be closed. However, the recommendation still requires full parliamentary debate and approval before it becomes law.
According to the committee’s report, many Kenyans, particularly those in the informal economy and micro, small and medium enterprises, depend on Saccos and other non-bank lenders because they cannot easily access bank loans. Since these borrowers already carry higher risk, exploitative lending practices hit them hardest.
“The Committee recommends that the Consumer Protection Act, Cap 501, be amended to entrench the in duplum rule,” the report states.
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Committee Chairperson Muchangi Karemba said the amendment would guard Sacco members and other borrowers against exploitative lending. He argued that extending the rule would close a legal gap and create a fairer framework for all borrowers, not just bank customers.
“We must bring to an end the exploitation of the many Kenyans who turn to these lending institutions seeking financial assistance, only to end up losing even the little they have through such exploitation,” Karemba said.
The committee also flagged inconsistent court interpretations of when the rule should apply, for example whether it takes effect before or after a loan is restructured, and whether penalties count as interest. Because of this uncertainty, the report notes, public confidence in the financial sector has suffered, raising concerns under Article 46 of the Constitution.
During debate on the report, Marakwet West MP Timothy Kipchumba accused informal lenders of imposing heavy charges and aggressive recovery tactics on borrowers. He warned that some Sacco members and other borrowers risk losing vehicles or homes after defaulting on loans secured against such assets.
“These institutions exploit our people. They impose endless accumulation of interest and harass our people left, right and centre,” Kipchumba said.
The committee’s adoption of the petition is only a recommendation. For Sacco members to gain the same protection currently available to bank customers under Section 44A, Parliament still needs to debate and pass the proposed amendments to the Consumer Protection Act. Until then, the in duplum rule remains unenforceable against Saccos and other non-bank lenders under statute, though some courts have applied it to them on public policy grounds.
By Benedict Aoya
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