Why MPs are targeting boda boda loan sharks

This story has significance for readers across Kenya and beyond.

Lawmakers have moved closer to taming companies selling motorcycles to unemployed young people, disregarding established lending practices.

MPs now want the in duplum rule to apply to such firms, so that the interest charged while the motorcycles are lent to young people does not exceed the original loan amount.

The in duplum rule (from Latin, meaning "in double") is a long-standing legal principle of public policy designed to protect borrowers from being crushed by accumulating interest.

The rule dictates that interest on a debt must stop running when the total accrued interest equals the unpaid principal amount.

The move to the implement the in duplum rule came up on the House after a petition by the presented by Kenya Bodaboda Riders and Owners Association National Executive Chairperson Charles Gichira accusing the lenders of imposing high interest rates and extra charges, failing to disclose loan terms adequately, and using aggressive debt-recovery methods.

According to the petition, some borrowers have allegedly repaid more than the value of their motorcycles but still have not acquired ownership of the assets.

The riders further allege that motorcycles are repossessed soon after borrowers default, while stolen motorcycles fitted with tracking devices are allegedly not recovered.

They also claim some borrowers continue to face repayment demands even after insurance companies have compensated lenders for stolen or damaged assets, with some subsequently receiving adverse credit listings.

The Petitioner alleges that the company imposes excessively high interest rates and other charges, exposing borrowers to financial hardship and exploitation,

As a result, many youths end up losing their motorcycles after they are impounded after defaulting on their payments, rendering them jobless.

The petitioners complained to the House of unfair lending and asset-financing practices by Mogo Auto Limited after complaints from boda boda riders across the country.

They now want the House to establish whether Mogo Auto operates within the legal and regulatory framework governing lending and asset financing, including requirements overseen by the Central Bank of Kenya.

Chairman Justice and Legal Affairs committee George Murugara said they will ensure the rule is put into law so that forms charging more interest on the bod boda riders are punished.

“As a committee, we will be looking at the duplum rule to see if it can apply to such cases. We will speak for our boda boda and where these firms commit offences, they should be punished harshly,” Mr Murugara said.

Mr Murugara said the contracts between the lending firms and the boda boda riders have no basis in law and they cannot sustain a case in any court of law.

“These are not banks nor money lenders firms and therefore they have no legal basis upon which to charge more interest to our boda boda riders.

Majority Leader Kimani Ichung’wah said Parliament for too long has made threats on such firms exploiting boda boda riders and it's now time to act.

“Predatory lenders who have taken advantage of our boda boda riders through exploitative lending practices must be stamped out, firmly regulated, and, where they operate outside the law, deregistered,” Mr Ichung’wah said.

This is not the first time the House is seeking to crack the whip on firms preying on boda boda riders through unfair lending practices.

In 2024, the boda boda association presented a petition to the committee of Finance and National Planning accusing five firms of exploiting them in the boda boda loan deal.

Appearing before the committee, the boda boda association led by chairman Alex Kutema together with other officials and riders, told the Kuria Kimani led committee how they have suffered in the hands of five companies who give their members motorcycles on loan but they disappear without a trace just when the riders are about to clear the loan.

The riders narrated to MPs how their motorcycles only disappear when they have paid over 90 percent of the total amount and the companies never help them to recover them.

Interestingly, Mr Kutema told MPs that when the motorcycles disappear within two or three months, the companies can trace them and hand them back to his members.

The association named Watu credit, Mogo, Tugende,15 Seconds, Mwananchi Credit and My Boda as some of the firms that collude with the thieves to steal the motorcycles just when the loan was about to be completed.

The boda boda association told MPs that they are never given logbooks of the motorcycles even after completing the loan, they don't pay the insurance companies and are only given one ignition key for the motorcycle.

When acquiring the motorcycle, the association told MPs that they pay a deposit of Sh40, 000 which caters for insurance and tracker but upon completion of the loan, the riders are never given the tracker neither are they shown the insurance company or handed over the logbook.

The association told MPs that if they default in paying the loan for a day, the companies will come and pick the motorcycle and if you need it back, then you must part with Sh4,000 for the breakdown, Sh300 charged per day for storage and the loan amount plus interest on the days that you have defaulted.

If one cannot raise the amount, the association told MPs that the companies permanently repossess the motorcycle and the rider is given nothing and forfeits all the loan amounts they had repaid.

The association told MPs most of their members even after completing the loan must wait for two years to be handed the logbook.

Reporting originally appeared via Nation Africa. Read the full source for additional context.