Digital lenders in Kenya are increasingly under scrutiny over their use of the Small Claims Court (SCC), with concerns that some may be exploiting the court system to pressure borrowers. The SCC, established under the 2016 Small Claims Court Act and updated in 2020, was intended to offer a fast, affordable process for resolving disputes under KSh 1 million. But the court’s efficiency has made it a target for aggressive debt recovery tactics, especially by mobile loan providers and debt collection agencies.
Why Digital Loan Cases Are Being Dismissed
Recent dismissals of Small Claims Court cases have raised questions about the legitimacy of many filings by digital credit providers. Among the most common reasons for dismissal:
- Jurisdiction Issues: Lenders are filing cases at courts like Nairobi’s Milimani Law Courts even when borrowers reside in different counties. The SCC Act limits jurisdiction to where the cause of action occurred or where the defendant lives. Failure to establish this connection renders many claims invalid.
- Unlicensed Lenders: The Central Bank of Kenya (CBK) regulates digital lenders through the Digital Credit Providers (DCPs) licensing framework introduced under the Central Bank of Kenya (Amendment) Act, 2021. Entities operating without a CBK license, such as Aventus Technology Limited, have had their cases, like 139 dismissed in March 2025, thrown out for lack of legal standing.
- Vexatious or Frivolous Claims: Some lenders file claims for amounts as low as KSh 2,000, without proper documentation or clear evidence of debt. The judiciary has flagged this trend, stating that many such claims are intended to intimidate rather than to seek genuine redress.
Who Is Behind the Rise in Claims?
The bulk of the claims come from:
- Licensed Digital Lenders: These firms offer short-term mobile loans without collateral. Some of the more prominent names include Ceres Tech Limited and Jijenge Credit Limited.
- Debt Collection Agencies: Often acting on behalf of digital lenders, these agencies file cases in bulk to pressure borrowers into quick settlements. However, regulatory risks have forced some lenders to sever ties with them.
- Unregistered Digital Lenders: Despite lacking CBK licenses, some unregistered entities continue to file cases, often exploiting borrowers’ limited understanding of court processes.
Why the Small Claims Court Is Being Used
The SCC’s speed and low cost make it a preferred venue for pursuing loan defaulters. The Central Bank of Kenya reported 14 million defaulted digital loan accounts by November 2024, an indicator of the scale of the debt recovery challenge. For digital lenders facing high non-repayment rates, filing cases, even for small amounts, is a cost-effective way to recover dues.
In some cases, however, the motivation appears to extend beyond recovery. Filing suits can act as a pressure tactic: borrowers may choose to settle immediately to avoid legal fees, embarrassment, or time lost in court, even if the lender’s claim is weak. This tactic is not far removed from other predatory practices like contact spamming and data misuse, which have plagued Kenya’s digital lending space.
Borrowers’ Rights and Protections
Borrowers facing claims in courts where they do not reside can challenge the filing on jurisdictional grounds. The SCC law clearly outlines that cases should be filed in locations tied to the residence of the borrower or the origin of the dispute.
In addition, CBK’s DCP regulations require lenders to clearly disclose loan terms and prohibit aggressive recovery practices. Borrowers who experience harassment or privacy violations can report to the Office of the Data Protection Commissioner.
A System Under Strain
Between April and July 2021, the Milimani Small Claims Court processed 481 of 1,222 registered cases, a sign of the high case volumes it handles. With a growing number of filings from digital lenders, many of which involve low-value or poorly substantiated claims, the SCC’s ability to provide timely justice is increasingly challenged.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.