Treasury Cabinet Secretary John Mbadi has fired a stunning warning shot at Kenya’s predatory lending industry, threatening to revoke the licences of microfinance and digital credit companies that deliberately structure loans to make repayment impossible, even as four of the sector’s most controversial players walked free from court on a legal technicality just days earlier.
Appearing before the Senate on Wednesday, Mbadi named and shamed lenders who issue logbook-secured credit facilities with the sole objective of seizing and selling borrowers’ vehicles, not recovering debt. His remarks, which have since gone viral, come barely 48 hours after a High Court dismissed a constitutional petition that sought to kick Mwananchi Credit Ltd, Platinum Credit Ltd, Izwe Loans Ltd and Premier Credit Ltd out of the market for allegedly advancing digital credit without a valid licence from the Central Bank of Kenya.
“There are lenders who issue credit facilities and take borrowers’ logbooks with the objective of selling the vehicles. They have structured the loans in such a way that repayment becomes practically impossible. Such entities must operate within the law or we will revoke their licences,” Mbadi told senators, his remarks broadcast live on national television.
The CS’s intervention lands at a moment of acute public outrage over Kenya’s microfinance sector. Court records, regulatory data and investigative reporting have combined to paint a damning picture of an industry that for years operated like a financial cartel, inflating debts beyond recognition and terrorising borrowers through repossession tactics that judges have described, in open court, as gangster-like.
The Court Escape
The petition that collapsed on February 20 was filed by one Mark Muko, who argued that the four lenders had been advancing credit illegally, exposing borrowers to predatory interest rates, opaque loan terms and abusive recovery practices, all without the CBK’s regulatory blessing. It was a bold, broadly supported argument. It was also, the court found, brought to the wrong door at the wrong time.
The High Court ruled that Muko had failed to first exhaust the dispute resolution mechanisms available under the Microfinance Act Regulations before approaching the bench. In pointed language, the judge observed that the petitioner had neither averred nor demonstrated that the regulatory complaint mechanism had been explored and a resolution communicated, making the petition both premature and procedurally improper.
For Mwananchi Credit, Platinum Credit, Izwe Loans and Premier Credit, the ruling was a lifeline. But consumer advocates and legal practitioners say it was not an acquittal. The court did not rule that the companies were compliant. It ruled only that Muko had knocked on the wrong door first.
“The ruling doesn’t give digital lenders a free pass,” one legal expert said. “CBK still retains full enforcement power. What the court is saying is that consumer protection claims must be grounded in evidence and proper procedure, not outrage alone.”
A Pattern of Inflated Debts
For Mwananchi Credit in particular, the reprieve from the Muko petition arrives amid a litigation storm that threatens to dwarf it entirely. The landmark 2023 High Court judgment in Jelangant and Another v Mwananchi Credit Ltd, in which Justice George Khaniri slashed a Sh22 million demand back to the Sh7 million principal originally borrowed, has become what lawyers now call legal dynamite in the hands of aggrieved borrowers.
The Jelangant case exposed with surgical precision how Mwananchi Credit had demanded Sh15 million in interest and penalties from a borrower who had already fully repaid the principal. Justice Khaniri demolished the company’s defence that, as a non-deposit-taking microfinance institution, it was not bound by the in duplum rule, which prohibits interest from exceeding the principal loan amount. The judge held that any entity that earns interest is a lender subject to the rule, regardless of its regulatory classification.
That precedent has since reverberated across Kenya’s judiciary. In a separate case, High Court Judge Kizito Magare blocked Mwananchi Credit from selling two seized lorries belonging to traders who had borrowed Sh2.5 million, repaid Sh3 million, and were still being pursued for a further Sh6.25 million through unregistered chattel mortgages that the court declared void. Judge Magare was scathing, stating from the bench that he was unable to fathom the mathematical permutations that had turned a Sh2.5 million loan into a Sh9.25 million claim, and warning that courts would not allow microfinance companies to operate like shylocks.
Court records reviewed by Kenya Insights show at least fifteen active cases filed against Mwananchi Credit in 2024 and 2025 alone.
Conservative estimates place potential combined claims against the company at over Sh2 billion, should even a fraction of aggrieved borrowers successfully challenge their loan terms. In another documented case, Harrogate Limited borrowed a Sh50 million facility that ballooned to Sh177.5 million in under two years, with the borrowers alleging they received only Sh30 million in disbursements despite being charged for the full amount, and that the rules of engagement were changed midway through repayment.
Mwananchi Credit has consistently denied wrongdoing. Company management has claimed the firm offers some of the lowest interest rates in the market and insists that complaints are fabrications by competitors. The company did not respond to requests for comment at the time of going to press.
Mbadi’s Crackdown
The Treasury CS, responding to Senate questions raised by Kisumu Senator Tom Ojienda through Bungoma Senator Wafula Wakoli, outlined a sweeping package of regulatory reforms designed to restore order in a sector that has grown at breakneck speed while leaving a trail of financial devastation.
Mbadi disclosed that the CBK now mandates all Non-Deposit Taking Credit Providers to be licensed under a comprehensive Digital Credit Providers regulatory framework, setting strict eligibility criteria, governance standards and consumer protection obligations. As of December 2025, there were 195 licensed NDTCPs advancing a combined Sh110.5 billion in credit to Kenyan borrowers.
The CS also revealed that fines for violating the Banking Act have been quadrupled, from Sh500,000 to Sh2 million, in a move Mbadi described as designed to be dissuasive and instil discipline. When Senator Moses Kajwang’ pressed him on lenders whose interest charges exceed twice the principal amount, Mbadi confirmed that credit providers must have their pricing models approved to ensure compliance with the in duplum rule under Section 44 of the Banking Act.
The CBK is also working with the Office of the Data Protection Commissioner to enforce uniform data privacy standards, following a wave of abusive debt collection practices that have included doxxing borrowers’ contacts and bombarding third parties with humiliating messages.
Competition Authority of Kenya data underpins the urgency of the crackdown. Consumer complaints against microfinance and digital lenders surged by 28 percent in 2025 compared to the previous year, the steepest annual increase on record for the sector.
A Regulatory Crossroads
The simultaneous unfolding of Mbadi’s Senate address and the court’s dismissal of the Muko petition captures the contradictory reality facing Kenya’s overstretched borrowers. On one hand, the government is making its most forceful public declaration yet that the era of predatory lending is over. On the other, the very companies at the centre of that predation are escaping accountability on procedural grounds that, while legally sound, feel like cold comfort to borrowers who have watched debts triple and vehicles disappear.
For fintechs and microfinance houses operating in Kenya, the dual message is nevertheless unmistakable: get licensed, maintain transparent pricing, and keep your paperwork clean, or face a regulator that is no longer willing to look the other way.
For the hundreds of borrowers now armed with the Jelangant precedent and emboldened by the Treasury’s public stance, the fight is far from over. The Muko petition may have failed on procedure. But the substance of what it alleged, that certain lenders are operating outside the law and beyond the reach of basic consumer protection, remains a live and explosive question in Kenya’s courts, Parliament and regulators’ offices alike.
The deluge, as one legal observer put it, has only just begun.
