Crackdown aims to protect consumers from exploitation in Kenya’s fast-growing digital lending sector
The Competition Authority of Kenya (CAK) has launched a probe into the practices of digital lenders amid growing concerns over exorbitant fees, hidden charges, and unclear loan terms that have left many Kenyans trapped in cycles of debt. This investigation signals a stronger regulatory stance as the country grapples with balancing innovation in fintech with consumer protection.
Rising Complaints Prompt Action
Speaking at the launch of the 2024 Banking Customer Satisfaction Report on February 12, 2025, at the Radisson Blu Hotel in Nairobi, CAK Director-General David Kibet Kemei said the authority had received an increasing number of complaints from consumers who feel misled or exploited by digital loan providers.
“These platforms are playing a critical role in financial inclusion, but this cannot come at the expense of transparency and fairness,” said Kemei. “Our mandate is to ensure that all market players operate within the bounds of the law and that consumers are not subjected to predatory practices.”
Opaque Terms and Hidden Costs
Digital lenders, many of which operate through mobile apps, have grown rapidly in recent years, offering fast and convenient loans to millions of Kenyans. However, critics say that many borrowers are unaware of the true cost of these loans until it’s too late. Interest rates can exceed 100% annually, compounded by hidden fees, late penalties, and unclear repayment structures.
In some cases, borrowers who default by even a few days face aggressive debt collection tactics, including public shaming through phone contact lists — a practice that has drawn widespread condemnation from consumer rights groups.
Regulatory Gaps and Consumer Risk
While the Central Bank of Kenya (CBK) began licensing digital lenders in 2022 to bring more oversight to the sector, many unregulated platforms continue to operate, exploiting gaps in enforcement. CAK’s current investigation will examine whether some lenders are violating competition laws by engaging in deceptive advertising, unfair pricing models, or anti-competitive behavior.
According to the 2024 Banking Customer Satisfaction Report, customer trust in digital lending platforms has declined, with many citing lack of transparency as their top concern.
Fintech vs Fairness
Industry observers note that while digital lending has expanded financial access, especially among unbanked populations, it must not come at the cost of fairness and ethical standards.
“Digital credit has been a lifeline for many, but it’s also becoming a trap for the most vulnerable,” said Anne Nyambura, a financial literacy advocate. “We need to create a lending environment that is both innovative and safe for consumers.”
CAK’s Next Steps
The CAK’s probe will include a thorough review of loan terms, interest rate structures, and consumer consent protocols across several leading digital lenders. The authority is expected to collaborate with the CBK and other regulatory bodies to ensure a coordinated response.
Depending on the findings, digital lenders found in violation of competition laws could face penalties, mandatory restructuring of loan terms, or even license revocation.
A Call for Responsible Lending
As Kenya continues to embrace digital transformation in finance, regulators are under pressure to ensure that consumer rights keep pace with technological advancement. The CAK’s move is being hailed as a necessary step toward restoring trust and accountability in the lending market.
“Consumers must not be left to navigate this evolving landscape alone,” Kemei emphasized. “Transparency, fairness, and affordability must be the pillars of any lending system — digital or otherwise.”
The coming months will be crucial in determining whether digital lenders adapt to a more ethical framework — or face tighter regulatory intervention.
