It will now be illegal for Microfinance companies to harass borrowers as a new law takes effect.

The Business Laws (Amendment) Bill, 2024, which amended the Microfinance Act, took effect on January 1, 2025.

The new law says a non-deposit-taking microfinance lender in the course of debt collection shall not harass, abuse or oppress a borrower, guarantor or any person in connection with the recovery of the debt.

It is now illegal to threaten or use violence or unlawful means in debt collection.

Use of obscene or profane language to a borrower, guarantor or any person connected with the recovery of the loan is also illegal.

The new law mandates the companies to provide borrowers with accurate information about loan terms and financial costs and maintain borrower confidentiality.

The lenders are also required to furnish borrowers with accurate information on the procedure and conditions for lending and recovery.

Debt recovery practices employed by some digital lenders have been described as cruel.

Borrowers who default, even by one day, have reported receiving threatening messages.

The Business Laws (Amendment) Bill, 2024 proposed to expand the Central Bank of Kenya (CBK) regulatory mandate to include non-deposit-taking credit providers such as digital lenders, peer-to-peer lenders, and credit guarantee businesses.

It seeks to promote fair practices, ensure financial stability, and enhance consumer protection through licensing, credit information sharing, and stricter oversight.

Additionally, it transfers oversight of non-deposit-taking microfinance businesses from the Microfinance Act to the CBK Act.

The shift introduces new requirements for transparency, including the disclosure of all credit costs and borrower rights.

The Bill, sponsored by the Leader of the Majority Party, Hon. Kimani Ichung’wah, sought to amend nine Acts of Parliament to enhance regulatory oversight, streamline processes, and promote economic stability.

The proposed amendments of the Business Laws (Amendment) Bill, 2024 affect the Banking Act, Central Bank Act, Microfinance 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.