Nairobi, Kenya – July 9, 2025 – The Competition Authority of Kenya (CAK) has launched a comprehensive investigation into digital lending platforms following a surge in consumer complaints about exorbitant interest rates and opaque loan terms. The probe, announced this week, targets practices such as charging up to 40% interest on loans and requiring repayments in foreign currencies like U.S. dollars, which have raised concerns about fairness and transparency in Kenya’s rapidly growing digital credit sector.
Surge in Complaints Sparks Investigation
The CAK’s investigation comes amid mounting public outcry over predatory practices by some digital lenders. According to posts on X, borrowers have reported being charged interest rates as high as 40% and encountering hidden clauses in loan contracts that complicate repayment. Some lenders have also demanded repayments in dollars, a practice that adds financial strain due to currency exchange fluctuations, particularly for low-income borrowers.
The authority’s move aligns with its 2023-2027 strategic plan, which emphasizes consumer protection and oversight of digital economies. David Kemei, CAK Director-General, stated during the plan’s launch that the agency is prioritizing enforcement against anti-competitive practices, with digital lending identified as a key area of concern due to a rise in related complaints.
Digital Lending’s Rapid Growth and Regulatory Gaps
Kenya’s digital lending sector has seen explosive growth, with over 8 million Kenyans—roughly 16% of the population—relying on mobile loans monthly, according to a report by the Digital Financial Services Association of Kenya (DFSAK). The Central Bank of Kenya (CBK) has licensed 126 digital credit providers (DCPs) as of June 5, 2025, including firms like Watu Credit Ltd, Unifi Credit Limited, and BRAC Kenya Company Limited. However, the sector’s rapid expansion has outpaced regulatory oversight, leading to unethical practices.
A recent CBK survey highlighted significant compliance gaps, noting that only 35% of digital lenders conduct thorough investigations into suspicious activities, making them vulnerable to money laundering and other financial crimes. Unlike traditional banks, which deploy advanced AI and automated monitoring systems, nearly half of digital lenders lack basic compliance tools, exacerbating risks in the sector.
Additionally, the Office of the Data Protection Commissioner (ODPC) reported over 4,000 complaints in early 2025 about digital lenders misusing customer data, such as accessing phone contacts without consent and employing aggressive debt collection tactics. A notable case involved digital lender Whitepath, which was fined KES 250,000 ($2,000) in March 2025 for listing an individual as a loan guarantor without permission, following a prior KES 5 million fine in 2023 for similar violations.
CAK’s Push for Stronger Regulation
The CAK is advocating for the swift enactment of the Business Laws (Amendment) Bill 2024 to enhance its regulatory powers over digital markets. The proposed legislation would enable closer collaboration with agencies like the CBK and ODPC to address misconduct, such as predatory lending and data privacy breaches. “Digital lenders are the biggest area of concern,” Kemei emphasized, noting that the bill would align Kenya with global regulatory trends in countries like the UK and South Africa.
The investigation will examine whether digital lenders are engaging in anti-competitive practices, such as misleading loan terms or exploitative interest rates, which violate Kenya’s Competition Act (CAP 504). The CAK has warned that violators could face fines of up to 10% of their annual turnover or imprisonment for up to five years.
Broader Context and Challenges
The probe reflects broader efforts to clean up Kenya’s financial sector. A Business Daily report detailed how financial crimes, including money laundering and tax fraud, have evolved in scale and sophistication, with suspicious transactions totaling KES 6.976 trillion over three years to 2023. Digital lenders’ weak compliance measures have raised fears that they could become conduits for such activities, prompting the CBK to reduce the number of licensed DCPs to 51 earlier this year to curb predatory practices. Industry players warn that overly stringent regulations could stifle innovation in a sector that has expanded financial inclusion for millions of Kenyans excluded from traditional banking.
What’s Next?
The CAK’s investigation is expected to conclude by September 30, 2025, with the authority engaging stakeholders, including the CBK, DFSAK, and consumer groups, to gather evidence. Borrowers affected by unethical practices are encouraged to file complaints with the CAK or ODPC, while the public can access updates on the investigation via the CAK’s website (www.cak.go.ke) (www.cak.go.ke).
As Kenya balances consumer protection with the growth of its digital economy, the outcome of this probe could set a precedent for regulating fintech across East Africa, ensuring that digital lending remains a tool for financial inclusion rather than exploitation.
