A Nairobi Small Claims Courtroom has struck out two debt restoration fits filed as a result of the digital lenders searching for the unpaid loans weren’t licensed by the Central Financial institution of Kenya (CBK), setting a precedent in tackling the non-performing loans.
Resident Justice of the Peace Gladys Kiama dominated that Tri-State Capital Restricted and Mombo iCapital Restricted lacked the authorized capability to implement their mortgage agreements in courtroom.
The lenders had individually sought to recuperate Sh500,000 and Sh162,297, respectively, from two debtors.
However the Justice of the Peace stated the businesses failed to point out they have been legally authorised to hold out money-lending enterprise.
The swimsuit has forged a highlight on a December 2021 regulation, which empowers the CBK to license and oversee beforehand unchecked cell app lenders from April 2022.
Since then, the CBK has licensed 252 digital credit score suppliers after receiving greater than 800 functions because the banking regulator seeks to regulate the lenders following complaints from debtors who will pay annualised rates of interest of greater than one hundred pc
“The claimant has not demonstrated that it possesses the authorized capability and regulatory authority crucial to interact within the lending actions disclosed within the assertion of declare,” the Justice of the Peace stated within the rulings dated July 17, 2026.
She added that the lenders lacked the requisite standing to hunt enforcement of the contested lending preparations earlier than the courtroom.
The selections have been delivered in separate fits involving Geoffrey Mucuku and Florence Wawira, who had been sued over alleged mortgage defaults because the cell app lenders battle with mounting defaults.
Tri-State Capital advised the courtroom it superior Mr Mucuku a mortgage of Sh213,500. It stated the power was repayable as Sh229,513 in a single instalment by April 2021.
The corporate stated the mortgage was secured by a motorized vehicle, however the borrower defaulted, leaving an impressive stability of Sh85,000 that later rose to Sh500,000.
This prompted Tri-State to hunt courtroom intervention for an order compelling the borrower to pay the quantity.
It additionally stated the car had a registered caveat, making it unavailable on the market to recuperate the debt.
Mombo iCapital stated it lent Ms Wawira Sh65,000 in mid-2025, repayable inside one month with curiosity of Sh13,650. It added that the settlement imposed a weekly late fee cost of three.5 p.c if the borrower defaulted. It advised the courtroom the excellent quantity had risen to Sh162,297 as at October 2025.
As an alternative of analyzing the debtors’ legal responsibility, the courtroom first thought-about whether or not the businesses had authorized authority to interact in lending enterprise.
The Justice of the Peace stated the courtroom file confirmed neither claimant was licensed as a digital credit score lender by the CBK.
She stated Part 3 of the Banking Act requires each particular person or entity finishing up banking or monetary enterprise in Kenya to acquire the required licence from the regulator.
“It then follows that conducting lending enterprise with out such licensing quantities to an illegality and financial danger,” she stated.
She added that the regulatory framework exists “to guard members of the general public from unregulated lending practices and to make sure that entities engaged within the enterprise of advancing credit score function throughout the confines of the regulation.”
The courtroom stated a celebration conducting regulated monetary actions with out the required authorisation couldn’t search the courtroom’s help to implement rights arising from these enterprise actions.
It acknowledged that permitting an unlicensed lender to proceed such enterprise would offend public coverage.
In accordance with the Justice of the Peace, unlicensed lenders can’t recuperate money owed arising from illegal lending actions, a discovering that extends a rising line of courtroom rulings that deal with CBK licensing as a threshold requirement for lenders searching for to recuperate money owed by means of the courts.
The Justice of the Peace discovered the 2 firms had not demonstrated they possessed “the authorized capability and regulatory authority crucial to interact within the lending actions disclosed within the assertion of declare.”
The Justice of the Peace stated it grew to become pointless to find out whether or not the debtors truly owed the cash claimed.
“The claimant lacks the locus standi to institute or file a swimsuit or in any method interact the courtroom for redress,” she stated, placing out the 2 claims.
Customers of cell phone-based micro-lenders, which embrace the Silicon Valley-backed apps, have surged to over two million, from 200,000 in 2016.
Other than charging excessive rates of interest, shoppers say the digital lenders have been infringing on their knowledge privateness by bombarding the contacts they’ve saved on their cellphones with calls and messages after they default.
This prompted the 2021 regulation change to rein within the lenders, which additionally violated client privateness.
The laws required present digital lenders to use for CBK licences inside six months and the licensing course of is phased as a result of the regulator is reviewing lots of of functions and searching for extra documentation from candidates.
