Kenya’s digital lending industry faces a fresh legal challenge after a Nairobi court ruled that fintech lenders without Central Bank of Kenya (CBK) approval may not have the standing to pursue borrowers through the courts.
The decision places regulatory compliance at the centre of debt recovery disputes, with lenders now facing the possibility that loans issued before licensing could become difficult to enforce.
Resident Magistrate Gladys Kiama delivered the rulings after rejecting recovery claims by Tri-State Capital Limited and Mombo iCapital Limited, not because the borrowers’ alleged defaults had been disproved, but because the lenders had not shown that they were authorised to operate as credit providers.
The ruling effectively means that regulatory status could become the first test in future disputes between digital lenders and borrowers.
“The claimant has not demonstrated that it possesses the legal capacity and regulatory authority necessary to engage in the lending activities disclosed in the statement of claim,” Ms Kiama said.
The cases highlight the growing pressure on lenders that entered Kenya’s mobile credit market before the current licensing regime took shape.
Tri-State Capital had moved to recover Sh500,000 from a borrower after a Sh213,500 loan secured against a vehicle accumulated additional charges following default. Mombo iCapital was seeking Sh162,297 from a borrower over a Sh65,000 facility issued in 2025.
But the court found that the central issue was not the size of the outstanding balances. It was whether the companies had the legal authority to lend.
Ms Kiama cited Section 3 of the Banking Act, saying businesses conducting regulated financial activities must first obtain approval.
“It then follows that conducting lending business without such licencing amounts to an illegality and economic risk,” she said.
The ruling could complicate operations for digital lenders whose applications remain unresolved as the CBK continues tightening oversight of the sector.
Kenya introduced licensing requirements for digital credit providers after concerns emerged over expensive loans, aggressive collection methods and the handling of customer data. The move was aimed at moving the industry from rapid expansion towards greater consumer protection and accountability.
The CBK has so far licensed 252 digital credit providers from more than 800 applications received since the framework came into effect in 2022.
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