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Introduction
Walk through any town in Kenya and you will see the story of debt written on people’s faces. A young man ferries passengers on his boda boda, but every shilling he earns is eaten up by loan repayments. A mother takes out credit to buy a phone that she needs to run her business, only to realize that the final amount she will pay is almost three times the original cost. Families buy cars or household items on hire purchase only to lose them after years of struggling because the debt kept growing even when they had already paid back an amount equal to the price of the goods. In this economy, debt is not only a tool of survival but also a trap.
The common Kenyan borrower is often left at the mercy of lenders who understand the power of compounding interest. What begins as a manageable loan can snowball into a mountain of debt that never seems to end. It is no surprise that many Kenyans live in fear of creditors, losing dignity and property while their dreams of financial independence fade away. It is against this backdrop that the in duplum rule offers a ray of hope. This principle, rooted in fairness, seeks to ensure that no borrower pays more in interest than the original amount borrowed. Yet in Kenya, this principle remains weak and incomplete in practice.
The Origins of the In Duplum Rule
The phrase “in duplum” comes from Latin, meaning “double only.” Its essence is simple: once the interest on a loan equals the principal amount borrowed, no more interest should accrue. This rule is not a new invention. It has been applied in South Africa and other Commonwealth countries as a measure to prevent lenders from exploiting vulnerable borrowers. Its purpose is not to erase debt, but to strike a balance between the rights of lenders to earn a return and the rights of borrowers to be treated fairly.
Kenya introduced this rule in Section 44A of the Banking Act. The law provides that a financial institution cannot recover interest and charges that together exceed the principal amount outstanding when a loan becomes non performing. This was meant to stop the old practice where debts spiraled endlessly, leaving borrowers chained for life. But the scope of the law was limited to licensed banks and microfinance institutions. It left out a growing universe of lenders such as digital loan apps, shylocks, and informal credit providers who now dominate the market. As a result, many Kenyans still suffer the very abuses that the rule was supposed to cure.
Gaps in the Law and Judicial Struggles
Kenyan courts have tried to apply Section 44A, but the provision is riddled with ambiguities. For instance, in the case of Mureithi and Others v National Bank of Kenya [2016] eKLR, the High Court upheld the statutory limit, declaring that interest could not push the total recoverable amount beyond the principal at the time a loan became non performing. This was a welcome affirmation.
However, other cases have revealed cracks. In Otieno Odongo and Partners v National Bank of Kenya, the court noted that Section 44A did not address additional charges such as legal fees, insurance, and penalties. This omission allowed lenders to bypass the cap by renaming interest as charges. In another line of cases, banks argued that restructuring a loan resets the meter, creating a new principal and allowing interest to pile up afresh. The courts have been reluctant to issue a definitive ruling, leaving borrowers exposed to creative strategies that defeat the protective purpose of the rule. Another persistent gap concerns the effect of loan restructuring.
In National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & Another [2002] 2 EA 503 (CAK), the Court of Appeal was presented with an argument that restructuring should “reset the meter,” allowing interest to accrue anew. The court stopped short of a definitive ruling, but subsequent High Court cases have seen banks argue that each restructuring crystallizes a new principal, thus escaping the in duplum net, and allowing compounding to resume. These strategies reveal the need for legislative precision.
The result is a law that exists on paper but is often powerless in practice. Borrowers cannot rely on it with certainty. They must fight individual battles in court, a path that is costly, slow, and inaccessible to most.
Lessons from Other Jurisdictions
South Africa provides the clearest example of a working in duplum rule. In Reeves v Standard Bank of South Africa, the court confirmed that once the total interest equals the principal, no further interest can be charged. The rule applies strictly and includes penalty interest. Even restructuring does not reset the cap unless new money is advanced. This approach closes loopholes and leaves little room for manipulation. Other Commonwealth countries have not adopted a strict in duplum rule, but they have developed different mechanisms to curb predatory lending. In England, consumer protection laws focus on fairness and reasonableness of contract terms.
In Australia, Section 25 of the Uniform Consumer Credit Code (UCCC) aims to prevent unconscionable lending by permitting courts to reopen credit contracts that are “unjust,” although, again, there is no in duplum provision. The courts in Australia as in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 have demonstrated willingness to intervene in cases where compound interest and penalties create an oppressive burden, using the principle of equity and statutory powers rather than a fixed rule.
A Constitutional Imperative
Article 46 of the Constitution of Kenya, 2010, guarantees all consumers the right to fair, honest, and decent treatment in the provision of goods and services. Article 10 enshrines national values of transparency, accountability, and social justice. Uncapped or outmaneuvered interest, particularly in the face of sophisticated restructuring or relabeling by lenders, is plainly at odds with these constitutional imperatives.
Kenyan cases have begun to recognize this constitutional overlay. In Kenyea Commercial Bank Ltd v Samuel Kamau Macharia [2021] eKLR, the High Court held that financial institutions must comply not only with the letter of Section 44A, but also with the constitutional duty of fair dealing and the spirit of consumer protection. Where lenders sidestep interest caps by imposing disguised charges or penalties, the court held that such stratagems "may be struck down as a violation of the Constitution and public policy."
However, the patchwork approach, requiring every aggrieved borrower to file suit and prove a constitutional violation beyond the defective statutory coverage, is neither accessible nor predictable.
The Push for Reform
The need for reform has been highlighted in Parliament through petitions such as the one presented by Senior Counsel Allen Gichuhi. The petition pointed out that lenders easily evade Section 44A by splitting interest from charges or by using loan restructuring as a loophole. It argued that the in duplum rule should be codified in the Consumer Protection Act rather than the Banking Act. This is because the Consumer Protection Act applies to all lenders, not just licensed banks. By embedding the rule here, Parliament can extend its protection to SACCOs, digital lenders, shylocks, and anyone offering credit to consumers.
The Consumer Protection Act also offers more accessible enforcement mechanisms. Reforming the law in this way would make the in duplum rule a practical shield for the average Kenyan.
What Reform Should Look Like
For the in duplum rule to achieve its promise, several elements must be included in the reform.
First, the law must adopt a comprehensive definition of interest. This definition should include not just contractual interest but also penalties, default charges, and any other sum that flows from default. Otherwise, lenders will continue to repackage interest under different names. Second, the law must be clear on timing. Once a loan becomes non-performing, the cap should apply, and restructuring should not reset the meter unless new funds are advanced.
Third, the law should provide redress mechanisms. Where a lender breaches the rule, the borrower should be entitled to an automatic recalculation of the debt, refund of overpayments, or set off against the outstanding balance. Fourth, the rule should apply broadly to all providers of credit. Whether it is a digital loan app, a SACCO, or an informal lender, all should be bound by the same standard of fairness.
Fifth, there should be strong enforcement. Agencies such as the Competition Authority and the Consumer Protection Committee must be empowered to investigate and sanction breaches. Borrowers should not have to bear the heavy burden of expensive litigation.
Conclusion
The in duplum rule was meant to protect borrowers from perpetual indebtedness. In Kenya, its statutory form in Section 44A of the Banking Act was a bold step, but it has not gone far enough. Loopholes, ambiguities, and limited coverage have left borrowers exposed. Comparative experience, constitutional imperatives, and parliamentary debate all point in the same direction: reform is urgently needed.
By embedding a strong, comprehensive, and enforceable in duplum rule in the Consumer Protection Act, Parliament can close the gaps, extend protection to all borrowers, and make the law a living shield rather than an empty promise. Such reform would restore dignity to borrowers, reaffirm constitutional values, and ensure that in Kenya, the principle of fairness in lending is not just theory but practice. Until this happens, the boda boda rider, the mother buying a phone, and the family paying for a car will continue to carry debts heavier than they can bear. The time for reform is now
