Wednesday, June 15, 2011

Kenyan Laws on Loan Sharks (Shylocks)

Loan sharks are called "shylocks" in Kenya, and they are flourishing. The term comes from the ruthless moneylender, Shylock, in William Shakespeare's, "The Merchant of Venice." They operate like unregulated finance companies, relying on the sanctity of contract law to keep them in business. And they have not been disappointed. Their poorly worded, ambiguous, photocopied contracts are often misunderstood or misinterpreted by borrowers, many of whom discover after signing the contract that they are obligated to make interest payments of as much as 10 percent of the loan amount per day, or more.

Contract Law

  • Loan sharks rely on the sanctity of contract law. 
    Chapter 23 (3) of the Kenyan Law of Contracts states that any debt must be in writing to be enforceable. And Chapter 23 (2) (2) provides that "no contract in writing shall be void or unenforceable by reason only that it is not under seal." Strictly interpreted, this means that any signed written agreement is valid. Loan sharks have been able use this law in order to have their "contracts" upheld by the courts.

Microfinance Act of 2006

  • Many Kenyans have lost everything to unregulated loan sharks. 
    In Chapter 19 Part 1 (2) of the Microfinance Act of 2006, a "microfinance business" is defined as anyone engaged in lending or extending credit at his own risk, "including the provision of short-term loans to small or micro enterprises or low income households and characterized by the use of collateral substitute." The Microfinance Act also requires anyone conducting this kind of business to be licensed. In Part II Section 9 (1) (c) of that same act, it states that a license can be revoked and the business shut down if the business being conducted is "detrimental to the interests of its depositors or customers." It is not clear why loan sharks in Kenya have not been challenged with the Microfinance Act of 2006; even the loan sharks refer to the business they conduct as "microfinance."


  • All microfinance businesses must be licensed through the Central Bank of Kenya. 
    Chapter 19 Part II (4) (1) provides that "no person" can operate as a microfinance business unless such a person is registered as a company pursuant to the Companies Act and licensed through the Central Bank of Kenya. The penalty for noncompliance, as provided in Chapter 19 Part II (4) (2) is "a fine not exceeding one hundred thousand shillings, or to imprisonment for a term not exceeding three years, or to both."

Subject Authority

  • The Central Bank of Kenya has broad authority over microfinance businesses. 
    Pursuant to Chapter 19 Part II (4) (i) concerning microfinance businesses, the Central Bank has the authority to prohibit any "such other activity as the Central Bank may prescribe." Chapter 19 Part IV provides for Central Bank's authority to inspect the records and even to intervene in the management of any microfinance business.


Nancy said...


I am a member of some financial communities. I came across your website: and found it very informative and helpful. I would like to send you an article as a guest post (relevant to your site).

It will be my pleasure if I can contribute some quality content. Please kindly let me know how and where should I send you the article.

Waiting for your quick response.

Thanks and regards,
Nancy Smith.

Anonymous said...

Thanks for the blog post. I would like to propose an answer to the question of why so-called "shylocks" (as non deposit taking microfinance businesses) are not (yet) subject to CBK licensure or other regulations. Of course, please correct me if I am wrong or mistaken. As I read it and understand it, as of now, the MF Act (with its licensing requirements, etc.) only applies to deposit taking institutions; and not to non deposit takers. It says that the Minister of Finance "may" specify non deposit takers to be subject to the Act and then "may" prescribe regulations to govern them, but the Minister has not yet done so and therefore non deposit takers are not covered. Moreover, the definition of "institution" under the Act expressly only includes deposit takers. So, it seems the Act simply does not yet apply to shylocks or other non deposit takers. Am I missing something? Please note this is a comment only on the current actual state of affairs as I understand them, not a comment on what should be the law. Thanks again, and I encourage a reply.


Thank you and point taken. I agree, the MF Act as it is refers to only deposit taking institutions.

capsa susun online said...

These articles have got absolute sense devoid of confusing the readers.

Tohan Adamson said...


VICTORIA FINANCIER COMPANY, offers all kind of loan, ranging from $5,000 USD to $100,000,000.00USD Max. if you need a loan amount quickly write to her Email now with ( .
She helped me when i was so much in need of money. I lost my job. i and my kids were almost evicted from our house. I seeks assistance from all the people that i know but i could not even get drugs for my child. I also develop brain tumor as a result of stress and excess thinking. In my messed life, i look online for assistance there i found Mrs Victoria Financier Loan Lending company. I read how she always help different people from different countries. I urgently contact her, explain my situations to her same day and then i ask for any assistance that can give because i don't want my kids trow out to street; She advised me to get a loan amount with long term of 10years. I follow her advice, insure my loan amount of $18,000.00USD that i borrowed. The funds was sent into my bank account 4 days of contacting her and she also send the transfer confirmation slip to me and my bank gave me the money in full when i went to withdraw. Victoria Financier service is so amazing. I recommend Victoria Financier Lending Company to you, contact her today and be patient with to assist you because lot's of person contact her daily for assistance. She will help you urgently. Her Email is:

*Full Name:_________



*loan amount:_________

*Loan duration:_________


*Purpose of loan:_________

*Monthly Income:__________


*Next of kin:_________

*Email :_________

Merry Christmas

Unknown said...


Unknown said...


Anonymous said...


B2b smartlink ltd said...

B2b smartlink offer financial services eg loans at a very low interest rate.Click the following link to download b2b app today nd request for a loan.

Anonymous said...

Stress Free loan offer for all kind of Loan @2% Interest Do you need a loan to

pay off your bills and debts? Do you need funds to expand your business? We

offer loan at a very reliable low interest rate, we are also certify and

accredited by government to issues out financial assistance to those who are

in need of financial help .. Note: All mails should be replied to or call +27846918903

Your Name:....
Phone Number:......
Loan Amount Needed:.......
Loan Durations.......

Kind Regards
MR Franz Robert
Fast Service Loan Company
Managing Director ... / MD

Jessica Rivera said...

A personal loan is a kind of obligation or debt that is generally made for family or domestic purposes. It is not meant for business, or for long duration mortgage use. The financer lends money to the borrower, and the borrower needs to return the full amount to the lender, but not necessarily on a regular basis.

Registration Loans said...

Checkmate offering the fastest and easiest registration loans in Arizona. Here You can be eaisly get your Car registration loans.

calvinewers said...

Would I still be eligible if I have 50% scholarship from my university and I use the Ptptn money to pay my another 50%? a-luotto

Mark C. Houchens said...

Awesome post

Lina Cooper said...

This is really an excellent blog as well as its content.Progressive Finance

Kelly Thompson said...

I read your article and got it fine and informative. Please share more like that stuff. Investing In P2P Loans

lizza kim said...

I have got the superb information from these blogs finally.fastest way to get a loan

Yousufzai said...

An fascinating discussion may be valued at comment. I do believe that you simply write read more about this topic, it might not often be a taboo subject but normally persons are too few to dicuss on such topics. Cheers.

poker ampm said...

Student loan consolidation can be used by student or parents to combine their multiple education loans into one loan with one convenient monthly payment and often with lower interest rate. slickcashloan

charlie puth puth said...

I simply needed to appreciate you once more. I do not know the things that I would have done without the actual ways documented by you directly on such area of interest. It truly was the fearsome condition in my circumstances, however , discovering a skilled form you treated it forced me to weep with delight. I am grateful for this support and in addition have high hopes you are aware of a great job you are carrying out educating many people all through your blog. I know that you haven’t got to know all of us. Lowest mortgage rates in California

Standard Online Finance said...

Are you a business man or woman? Do you need funds to start up your own business? Do you need loan to settle your debt or pay off your bills or start a nice business? Do you need funds to finance your project? We Offers guaranteed loan services of any amount and to any part of the world for (Individuals, Companies, Realtor and Corporate Bodies) at our superb interest rate of 3%. For application and more information send replies to the following E-mail address:
Thanks and look forward to your prompt reply.
Muqse said...

I really enjoyed reading and also appreciate your work. mcb car loan - bank alfalah car finance