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Kenya: Court extends the application of the in duplum rule non-bank lending businesses

6 September 2022
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The High Court in Petition No. E002 of 2021- Anne J. Mugure & 2 Others v Higher Education Loans Board has declared that the in duplum rule applies to all persons involved in the lending business. The in duplum rule provides that arrear interest ceases to accumulate upon any amount of the loan owing once the accrued interest equals the principal amount owing when the loan becomes non-performing. Courts have argued that the essence of this rule is to tame the accumulation of interest rates and penalties to astronomical levels on defaulted facilities to the disadvantage of borrowers.

The facts of the case are as follows: the petitioners had borrowed money from the Higher Education Loans Board (HELB) to finance their undergraduate studies. They argued that HELB had been charging exorbitant interest rates and penalties which outgrew the principal amount borrowed. They sought the court to declare that the charging of the exorbitant rates violated their constitutional rights and the in duplum rule. HELB, on the other hand, argued that the Higher Education Loans Board Act No.3 of 1995 (the HELB Act) had prescribed the repayment dates and the penalties to be imposed in the event of a default. HELB further argued that the petitioners had not attempted to renegotiate their loans. HELB also argued that the in duplum rule did not apply to them, as the HELB Act allowed for the imposition of penalties.

The court held that the imposition of interest and penalties that exceeded the principal amounts violated the in duplum rule and the petitioners’ constitutional rights. The court also held that the in duplum rule would apply to those lending monies, as it does to banks. The court did not discuss the meaning of those involved in the “lending business.” Thus, the in duplum rule, in this case, applied to HELB.


The in duplum rule was a creature of the Banking Act, Chapter 488 of the laws of Kenya, and applied to banks and financial institutions that are regulated under the Act. By extending the in duplum rule to those involved in “lending business” and failing to clarify what amounts to lending business, courts have widened the statutory berth to include unregulated lenders. The judgement would expose such unregulated lenders to lawsuits from borrowers who may feel disadvantaged by the penalties and interest imposed once the loans become non-performing. We would recommend that lenders should take this risk into account when assessing borrowers’ requests for credit facilities.