KENYA Law and Practice Contributed by: Walid Khan, Ruth Wangui Rukwaro and Christina Wanjiku Wood, Africa Law Partners
ticularly for cross-border transactions and syndicated facilities. Following the CBK Climate Risk Guidelines (2021) and the launch of the Kenya Green Finance Taxonomy in 2024, lenders increasingly embed ESG covenants and reporting obligations into financing documents. Devel- opment finance institutions also provide green credit lines to Kenyan banks for on-lending to renewable energy, climate-smart agriculture, and sustainable infrastructure projects. These initiatives are pushing the market towards sustainability-linked documenta- tion standards in line with international practice. 3.10 Usury Laws Kenya does not currently have usury laws or statutory caps on lending rates. The interest rate caps intro- duced in 2016 under the Banking (Amendment) Act were repealed in November 2019, restoring market- based pricing. Today, interest rates are determined by commercial negotiations between lenders and bor- rowers, subject to the CBK’s oversight and pricing model. The Banking Act (Cap. 488) requires banks to seek approval from the Cabinet Secretary in charge of finance before increasing bank charges or fees, but this does not extend to statutory limits on loan inter- est rates. The Banking Act also provides that a lender cannot recover more interest than the principal amount. Kenya’s Consumer Protection Act also prohibits lend- ers from charging default charges other than: • reasonable charges in respect of legal costs that the lender incurs in collecting or attempting to col- lect a required payment by the borrower under the agreement; • reasonable charges in respect of costs, includ- ing legal costs, that the lender incurs in realising a security interest or protecting the subject matter of a security interest after default under the agree- ment; or • reasonable charges reflecting the costs that the lender incurs because a cheque or other instru-
ment of payment given by the borrower under the agreement has been dishonoured. This restriction does not extend to interest charged on overdue payments. 3.11 Disclosure Requirements Kenyan law requires lenders to disclose key loan terms, charges and risks to borrowers before execu- tion. This obligation is grounded in the Banking Act (Cap. 488), the Banking (Consumer Protection) Regu- lations, 2013, and CBK prudential guidelines, which collectively mandate transparency on matters such as interest rates, repayment schedules, default penal- ties and total cost of credit. These requirements are designed to protect borrowers from hidden costs and ensure informed decision-making. The Proceeds of Crime and Anti-Money Laundering Act requires reporting institutions to maintain their client’s records, including information about financial transactions. For public entities, the Public Finance Management Act, 2012 imposes additional disclosure and reporting obligations. All public borrowing must be authorised, disclosed in budget documentation, and reported to Parliament and the Controller of Budget. This frame- work is intended to promote accountability and pre- vent mismanagement of public debt. While Kenya does not impose a universal public fil- ing requirement for private loan contracts, regulators (including the CBK and CMA) may review financing arrangements in specific contexts – such as listed companies, public takeovers or prudential supervision of banks. In practice, legal documentation is care- fully reviewed to ensure compliance with disclosure standards, and non-compliance can attract regulatory sanctions.
4. Tax 4.1 Withholding Tax
Under the Income Tax Act (Cap. 470), interest pay- ments made to non-resident lenders are subject to withholding tax. Withholding tax on interest is a final
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