NAIROBI, Kenya – July 28, 2025 – Spire Bank, a struggling Kenyan lender owned by Mwalimu National Sacco, has been found to have violated banking regulations by increasing a loan’s interest rate from 28.5% to 32.5% without prior approval from the Cabinet Secretary for the National Treasury, as required under Section 44 of the Banking Act. The High Court of Kenya, in a ruling delivered on July 25, 2025, ordered the bank to revert the rate to its original level and issue a corrected loan statement to the affected borrower, marking a significant victory for consumer protection in Kenya’s financial sector.
The case originated from a complaint by a borrower, whose identity remains confidential, who alleged that Spire Bank unilaterally raised the interest rate on their loan in early 2025 without proper notification or regulatory approval. The plaintiff argued that the increase, which added a 4% hike to the original 28.5% rate, violated the Supreme Court’s landmark June 2024 ruling in Stanbic Bank Kenya Limited v Santowels Limited (Petition No. E005 of 2023). That decision mandated that banks seek Treasury approval for any interest rate increases on loans, a requirement rooted in Section 44 of the Banking Act to ensure transparency and protect consumers from excessive charges.
Justice Esther Maina, presiding over the case, ruled that Spire Bank’s actions were “unlawful and in direct contravention of regulatory oversight,” emphasizing that the bank failed to provide evidence of Treasury authorization for the rate hike. The court ordered Spire to immediately restore the original 28.5% rate, recalculate the borrower’s outstanding balance, and issue a revised loan statement reflecting the correction. Failure to comply could result in fines of up to KES 100,000 per day per loan account, as stipulated by Central Bank of Kenya (CBK) guidelines. Spire Bank, which was acquired by Equity Bank Kenya Limited in January 2023, has faced significant financial challenges, including a 90% loan default rate in 2020 and a negative core capital of KES 2.6 billion in 2022, operating below CBK’s minimum capital adequacy ratio. The bank’s history of financial distress, compounded by a KES 1.7 billion withdrawal by former owner Naushad Merali in 2016, has limited its ability to comply with regulatory standards, according to industry analysts. The CBK’s approval of Equity Bank’s acquisition of Spire’s assets and liabilities aimed to stabilize the lender, but the recent ruling highlights ongoing governance issues.
The ruling aligns with broader efforts by the CBK to enforce compliance following the repeal of interest rate caps in 2019, which had previously limited lending rates to 4% above the Central Bank Rate (CBR). The CBK’s recent rate cut to 12.0% in October 2024, coupled with strict penalties for non-compliant banks, aims to stimulate private sector credit while ensuring consumer fairness. For Spire, the court order adds pressure to an already strained institution, potentially impacting its ability to attract investors or fully integrate with Equity Bank’s operations.
The decision is expected to set a precedent for other Kenyan banks, reinforcing the Supreme Court’s stance on regulatory oversight. As Kenya’s financial sector navigates high non-performing loan rates (16.4% in December 2024), the ruling underscores the importance of balancing lender flexibility with consumer protections to maintain trust in the banking system. Spire Bank has not yet issued a public statement on the ruling, but sources indicate it is reviewing its compliance processes to avoid further penalties.
