The resurgence of loan shaming in Kenya is raising alarm, just three years after the government introduced regulations to eliminate aggressive and unethical debt collection practices by digital lenders. Recent complaints suggest that some firms are again defying rules set by the Central Bank of Kenya (CBK) and the Office of the Data Protection Commissioner (ODPC), reviving a problem that once drew public outcry.
Digital Lending and the History of Debt-Shaming
Kenya’s digital lending sector expanded rapidly over the last decade, fueled by widespread mobile phone use and the demand for fast, unsecured credit. More than 51 licensed digital lenders now serve around 8 million borrowers, disbursing between KSh 10 billion and KSh 15 billion monthly. These loans, often for small amounts, are especially popular with low-income earners and small business operators.
But from the start, the sector faced criticism over predatory lending practices, including:
- Exorbitant interest rates, some as high as 395% annually, compared to 12–14% for traditional bank loans.
- Aggressive debt collection, including public shaming, harassment, and unauthorized communication with third parties.
At the peak of the problem, some digital lenders sent threatening SMS messages to borrowers’ employers, friends, and family members, labeling them defaulters or even fraudsters. This led to widespread reputational damage, emotional distress, and in some cases, job loss.
In response, Kenya introduced two key laws:
- The Central Bank Amendment Act of 2021, which gave CBK the authority to license and regulate digital lenders.
- The Digital Credit Providers Regulations of 2022, which barred unauthorized data sharing, use of threatening language, and harassment of third parties.
In addition, the Data Protection Act of 2019 required all digital platforms to obtain explicit user consent before collecting or sharing personal data, helping establish guardrails for responsible data use in digital finance.
By mid-2024, enforcement efforts led to a reported 75% drop in loan shaming cases, with the CBK working in collaboration with the ODPC and the Digital Financial Services Association of Kenya (DFSAK).
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A Troubling Resurgence
Despite these regulatory milestones, reports of loan shaming have re-emerged in 2025, with digital debt collection tactics beginning to mirror earlier abuses. A number of smaller and less-regulated digital lenders are reportedly reverting to practices such as:
- Sending bulk SMS messages to a borrower’s entire contact list.
- Labeling borrowers as scammers or publicly accusing them of defaulting.
- Threatening legal action, even before following due process.
These tactics not only violate CBK regulations, but also breach the Data Protection Act, which strictly prohibits the sharing of personally identifiable information without consent.
Regulatory Loopholes and Weak Enforcement
The resurgence is partly blamed on enforcement challenges. While larger licensed digital lenders have largely stopped using third-party debt collectors, some unlicensed firms and smaller players continue to exploit grey areas in the law.
Borrowers’ limited awareness of their rights has made them especially vulnerable. Many Kenyans do not read loan app permissions before installation, unknowingly granting access to contact lists, call logs and SMS history. Once granted, some apps misuse this data to build credit profiles and shame defaulters into repaying, despite lacking transparency about how the data is stored or shared.
A 2024 study by the Centre for Intellectual Property and Information Technology Law (CIPIT) at Strathmore University found that most digital lending apps in Kenya collect far more data than necessary, often without clearly stating how it will be used.
Impact on Borrowers
The consequences of debt-shaming can be severe, often leaving borrowers with emotional trauma and heightened stress levels. Public embarrassment caused by lenders contacting friends, family, or employers can damage personal relationships and erode trust within social circles. In many cases, the fear of further humiliation pushes individuals to prioritize loan repayment over essential needs like food, rent, or school fees, deepening financial strain instead of offering relief.
Borrowers taking small loans averaging KSh 5,000, often to meet daily needs or buy stock for small businesses, may find themselves repeatedly harassed for missing repayments, even by just a few days.
Ongoing Enforcement Actions
The Office of the Data Protection Commissioner (ODPC) has taken disciplinary action against some violators:
- In 2025, digital lender Whitepath was fined KSh 250,000 for unlawfully listing a man as a loan guarantor. He had never consented to the role but received a debt collection call claiming he owed money. Despite denying involvement, the lender continued to harass him.
- In 2023, Fadhili Microcredit was fined KSh 5 million for unauthorized sharing of personal data with third parties during loan recovery efforts.
The CBK has also issued fresh warnings to licensed digital lenders that using intrusive or coercive debt collection methods could lead to license revocation. DFSAK Chairman Kevin Mutiso emphasized that contacting borrowers’ contacts is illegal and not practiced by members of the association.
However, enforcement remains uneven, especially given the volume of unregulated operators. Over 500 applications for digital lender licenses are still pending approval at the CBK, slowing down oversight and allowing some rogue players to continue operations under the radar.
Google has also taken steps to address the issue by updating its Play Store policy for loan apps operating in Kenya. The revised policy requires all digital lending apps to obtain appropriate licensing from the Central Bank of Kenya (CBK), comply with local data protection laws, and limit data usage strictly to what is clearly outlined in the app permissions. Apps that fail to meet these requirements now face suspension or removal from the Play Store, as part of efforts to curb unethical practices and protect user privacy.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.