Mobile loan lenders and non-deposit microfinance businesses face tougher operating conditions ahead, as MPs move to introduce at least four new conditions lenders must meet before advancing any loan, in a draft legislative proposal fronted by Kisumu West MP Rosa Buyu.
The proposal obligates lenders to give full and material disclosure of the charges and terms attached to a loan, ensuring borrowers fully understand the consequences of the borrowing arrangement before they commit to it.
“To protect the public from predatory behaviour of the non-deposit-taking microfinance businesses, the legislative proposal obligates lenders to give full and material disclosure of the charges and terms relating to the loans so that borrowers are fully aware of the consequences of the borrowing arrangements,” the draft proposal states.
Beyond disclosure, the proposal would subject the loan recovery process to the court procedures set out under civil procedure law, require lenders to give borrowers reasonable notice before pursuing debt recovery, and impose statutory limits on the maximum amount recoverable on non-performing loans, capping accumulated interest to prevent defaulting borrowers from being trapped in a cycle of endless debt.
The proposal lands as the National Assembly’s Public Petitions Committee is separately weighing a petition filed against Mogo Auto Limited, an asset-financing firm, over what boda boda riders describe as unfair lending terms.
The petition was brought by Charles Gichira, chairperson of the Kenya Boda-boda Riders and Owners Association, and raises concerns spanning high loan interest rates, hidden additional charges, inadequate disclosure of loan terms, difficulty obtaining ownership documents even after loans have been fully repaid, improper debt recovery procedures, and breaches of privacy and data protection.
“The company imposes excessively high interest rates and other charges, exposing borrowers to financial hardship and exploitation,” the petition states, adding that inadequate disclosure of loan terms, repayment obligations and charges has limited borrowers’ ability to make informed decisions and undermined consumer rights guaranteed under the Constitution.
Among the most striking claims in the petition is that some riders have reported making repayments exceeding the total value of the motorcycles they financed, only to remain without ownership of the asset at the end of the process.
The association is asking MPs to verify that the interest rates and charges Mogo Auto Limited levies on its members for motorcycle loans align with Central Bank of Kenya requirements, and has called on the National Assembly to investigate the company’s operations more broadly.
“The petitioner therefore requests that the National Assembly investigate the operations of Mogo Auto Limited, in order to establish whether it complies with the legal and regulatory framework governing lending and asset financing services. The National Assembly should then recommend appropriate legislative, regulatory and administrative measures, to protect boda boda riders and other borrowers from exploitation, intimidation and unfair business practices,” the petition states.
Committee members have also flagged the sheer volume of complaints lodged against the firm as a matter of concern in its own right.
Both the petition and Buyu’s legislative proposal arrive against a backdrop of mounting public frustration with the growing predatory tendencies of mobile loan lenders more broadly, a concern that has built steadily as digital and asset-based lending has expanded rapidly across the country in recent years.
Together, the two efforts reflect a wider push in Parliament to close regulatory gaps that have allowed some lenders to operate with limited oversight, and to shield borrowers from punitive interest rates and expensive, poorly disclosed loan terms in a sector that has, until now, remained largely unregulated.
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