Mwananchi Credit Faces Massive Lawsuits After Court Flags Predatory Lending That Left Customers’ Loans Ballooning

Courts Open Floodgates Against Mwananchi Credit As Emboldened Borrowers Mount Massive Challenge To Predatory Lending Practices

Mwananchi Credit Limited is staring at a litigation avalanche that could cripple its operations after the landmark Jelangant ruling opened the floodgates for hundreds of aggrieved borrowers to challenge astronomical debt inflation that has become the microfinance giant’s trademark business model.

The July 2023 High Court judgment that slashed a Sh22 million claim back to the original Sh7 million principal has become legal dynamite in the hands of borrowers nationwide, with court filings revealing a disturbing pattern of debt manipulation that transforms manageable loans into financial nightmares through creative accounting that even judges cannot comprehend.

Justice Kizito Magare captured the absurdity perfectly when he stated he was unable to fathom the mathematical permutations that caused a Sh2.5 million loan to balloon to Sh9.25 million despite borrowers repaying Sh3 million, declaring that if microfinance companies are allowed to operate like shylocks, the court would be missing its duty .

That sentiment is now reverberating across Kenya’s judiciary as borrowers file case after case armed with the Jelangant precedent establishing that the in duplum rule, which caps interest at the principal amount, applies universally to all lenders regardless of licensing status.

Justice George Khaniri demolished Mwananchi Credit’s defense that it operated outside banking regulations, holding that being a lender who earns interest subjects any entity to the rule regardless of regulatory classification .

Court records examined by Kenya Insights reveal at least fifteen active cases against Mwananchi Credit filed in 2024 and 2025, with legal practitioners reporting consultation requests have surged over 400 percent since the Jelangant ruling became public knowledge.

The financial implications are staggering. Conservative estimates based on documented cases suggest potential claims exceeding Sh2 billion if even a fraction of aggrieved borrowers successfully challenge their loan terms.

The company’s vulnerability stems from a systematic business model critics characterize as designed to capture collateral rather than facilitate genuine economic activity.

Court documents show Harrogate Limited borrowed a Sh50 million facility that ballooned to Sh177.5 million in less than two years, with borrowers claiming they only received Sh30 million in disbursements despite being charged for the full amount, and rules changing midway through repayment .

What makes the current legal onslaught particularly threatening is the shift in judicial attitude.

Courts increasingly view the in duplum rule as addressing a social and public interest issue where lenders target defaulters as profit-making machines, with the rule meant to protect borrowers from exorbitant interest accumulation and ensure lenders cannot use borrowers as cash cows .

The regulatory environment is simultaneously tightening.

Recent reforms including the Business Laws Amendment Bill of 2025 banned harassment by microfinance lenders while strengthening Central Bank oversight, responding to surging consumer complaints.

Competition Authority data shows microfinance complaints jumped 28 percent in 2025 compared to 2024, validating borrower grievances about predatory practices.

Multiple cases reveal Mwananchi Credit’s aggressive tactics, including one instance where lorry repossession was described by courts as gangster-like, with traders who borrowed Sh2.5 million and repaid Sh3 million still being pursued for an additional Sh6.25 million through unregistered chattel mortgages the court deemed void .

The company has consistently denied wrongdoing, with management claiming to offer some of the lowest interest rates in the market and insisting complaints are fabrications by competitors.

Company executives argue they became market leaders by putting clients first, with most loans repaid on time and clients returning for additional facilities . Yet the mounting adverse court findings undermine such defenses.

Legal experts predict the litigation wave will force fundamental changes in microfinance business models. Lenders can no longer hide behind complex fee structures and creative accounting that obscure true borrowing costs.

Courts are demanding transparency and fairness, increasingly willing to invoke equitable jurisdiction to refuse enforcement of exploitative contracts.

For borrowers, the Jelangant precedent represents a watershed moment.

What was once accepted as inevitable financial ruin is now being challenged successfully in courts that recognize unconscionable terms deserve no legal protection.

The message is clear: predatory lending practices that served Mwananchi Credit’s spectacular growth are now facing legal reckoning that threatens the company’s very survival.

The litigation floodgates have opened, and the deluge is only beginning.

Mwananchi Credit must now defend its entire business model against borrowers armed with judicial precedent that views their exploitation as fundamentally unjust.

Justice has arrived for Kenya’s aggrieved borrowers, delivered through courts finally willing to protect the vulnerable from financial predators masquerading as legitimate lenders.