Shylocking, also known as loan sharking, refers to the practice of lending money at extremely high interest rates, often enforced through threats or violence. This predatory lending preys on individuals in desperate need of cash, leading to cycles of debt and financial ruin. In Kenya, shylocking remains a contentious and debated issue.
Shylocking in Kenya Legal Status
Current Legislation:
- Illegal Practice: Shylocking is illegal in Kenya under the Money Lenders Act, Cap 273.
- Licensing Requirement: Anyone engaging in money lending activities must possess a valid license issued by the Cabinet Secretary. Without this, they are deemed to be shylocking.
- Interest Rate Cap: The Act also sets out maximum interest rates to prevent exorbitant fees.
Contract Law:
- Chapter 23: The Kenyan Law of Contracts states that any debt must be in writing to be enforceable.
- Legal Exploitation: Loan sharks exploit this law with ambiguous contracts that borrowers often misunderstand, leading to extremely high-interest payments.
Regulation and Challenges
Microfinance Act of 2006:
- Definition: A microfinance business is anyone lending or extending credit, including short-term loans to small enterprises or low-income households.
- Licensing: All microfinance businesses must be licensed through the Central Bank of Kenya.
- Penalties: Noncompliance can result in fines up to KES 100,000, imprisonment up to three years, or both.
- Oversight: The Central Bank of Kenya has broad authority over microfinance businesses, including inspection and management intervention.
Despite these regulations, loan sharks in Kenya often evade legal challenges and continue their operations under the guise of microfinance. The legal framework provides the tools to combat shylocking, but enforcement remains inconsistent.
Conclusion
Shylocking remains a significant issue in Kenya, with legal frameworks in place to curb the practice. However, enforcement is key to protecting vulnerable individuals from predatory lending practices. Continued efforts are needed to ensure that the laws are upheld and that those who engage in shylocking face the full extent of the law.
Useful Links
- The legal status of shylocking in kenya pdf
- The legal status of shylocking in kenya nairobi
- money lenders act kenya
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- how to register a shylock business in kenya