The Business Laws (Amendment) Bill, 2024, which amended the Microfinance Act, officially took effect on January 1, 2025, bringing significant changes to the microfinance sector. This new legislation aims to curb abusive debt recovery practices by prohibiting microfinance companies from harassing borrowers.
Sponsored by Majority Leader Kimani Ichung’wah, the Bill was introduced following widespread complaints about harsh debt collection methods used by some digital lenders. Borrowers who missed payments by just one day reported receiving threatening messages, and some lenders even contacted their friends and relatives to exert additional pressure.
Under the new law, non-deposit-taking microfinance lenders are explicitly barred from harassing, abusing, or oppressing borrowers, guarantors, or any individuals involved in debt recovery. The legislation makes it illegal to use threats, violence, or any unlawful means in the debt collection process. Additionally, using obscene or profane language toward borrowers or their connections is now prohibited.
Beyond these protections, the law mandates that companies provide borrowers with clear and accurate information regarding loan terms and financial costs, while also maintaining strict borrower confidentiality.
Lenders are also required to clearly communicate the procedures and conditions for both lending and debt recovery.
The Bill expands the Central Bank of Kenya’s (CBK) regulatory authority to include non-deposit-taking credit providers such as digital lenders, peer-to-peer lenders, and credit guarantee businesses. This expansion aims to promote fair practices, ensure financial stability, and enhance consumer protection through stringent licensing, credit information sharing, and oversight measures.
Furthermore, the oversight of non-deposit-taking microfinance businesses has been transferred from the Microfinance Act to the CBK Act. This change introduces new transparency requirements, compelling lenders to disclose all credit costs and borrower rights.
The amendments introduced by the Business Laws (Amendment) Bill, 2024, also affect a wide range of other laws, including the Banking Act, Central Bank Act, Standards Act, Kenya Accreditation Service Act, Scrap Metal Act, Special Economic Zones Act, Kenya Industrial Research and Development Institute Act, and the National Electronic Single Window System Act.
