https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/10196

Amka Credit Ltd v Nzangi (Civil Appeal E158 of 2025) [2026] KEHC 10196 (KLR) (9 June 2026) (Judgment) Neutral citation: [2026] KEHC 10196 (KLR) Republic of Kenya In the High Court at Machakos Civil Appeal E158 of 2025 EO Bitta, J June 9, 2026 Between Amka Credit Limited Appellant and Moureen Mueni Nzangi Respondent (An Appeal from the judgment of Honourable B.A. Luova, Adjudicator at Machakos Small Claims Court in SCCCOM/E074/2025, Amka Credit Limited vs Moureen Mueni Nzangi delivered on 12th day of June, 2025) Judgment 1.The Appellant, aggrieved by the decision of the Adjudicator, Hon. B.A.Luova in the Machakos Small Claims Court in SCCCOM/E074/2025 on 12th June 2025 preferred the present appeal. 2.In its Memorandum of appeal dated 4th July 2025. The Appellant’s appeal is premised on grounds that; 3.The Adjudicator erred in law by declining to award the Appellant interest despite having found that the Respondent was bound by the terms of the contract 4.The terms of the contract provided for payment of interest; the Adjudicator erred by declining to award interest 5.The Adjudicator erred in believing that the issue of interest was time-barred. 6.The background of the case, briefly, is that by a statement of claim dated 10th February 2025, and filed on 12th February 2025, the Claimant instituted a claim and sought:A.Judgment in the sum of kshs 250, 000/=B.Costs of the claimC.Interest on the amount and cost 7.The Appellant claimed that on 18th November, 2025, the Appellant advanced the Respondent a loan of kshs 250,000/= and, by a written agreement dated 18th November, 2025, the parties executed the contract. 8.The Appellant stated that the parties agreed that the said amount was to be repaid within a month of the date of advancement, with interest at 30% per month. 9.The Respondent defaulted on payment, and demands for payment were made, which were ignored, necessitating the institution of the claim 10.The Respondent, in her response dated 27th February 2025, denied the claim in totality. 11.The Respondent averred that the loan advanced was KShs 175,000, on 18th November, 2024, and the balance of khs 98, 000/= is still outstanding. 12.The Respondent counterclaimed that the amount advanced was not refundable, as the business of the Appellant was illegal, and the Appellant was operating without requisite license. 13.The matter proceeded by way of documents as permitted under the Small Claims Court Act. 14.The Adjudicator of the Small Claims Court found that the interest of 30% was not mentioned in the contractual documents, but found that the Respondent had pledged security to be realized upon late payment, and further, that there was also a late fee of kshs 1000 to be charged daily. 15.The Adjudicator found that no explanation had been advanced by the Appellant why the claim was filed late and why, as per the agreement of the parties, the collateral was not realized upon default, and on those grounds declined the interest claim. 16.The Adjudicator dismissed the Respondent’s counterclaim as it was evident that the parties had entered into a contract with the intention to be bound by the terms of their agreement. 17.The Adjudicator found that the Respondent could not hide under the illegality of the Appellant’s business to escape performance of her part of the bargain. 18.I have considered the Record of Appeal, the Memorandum of Appeal, and the rival submissions on the appeal. 19.Since it is an appeal from the Small Claims Court, a consideration of the Court’s appellate jurisdiction is apt. 20.Section 38 of the Small Claims Court Act provides that a person aggrieved by the decision or an order of the Court may appeal against that decision or order to the High Court on matters of law. 21.Being an appeal from the Small Claims Court, it is circumscribed by section 38 of the Small Claims Court Act to only matters of law. 22.In Otieno Ragot and Company Advocates vs National Bank of Kenya Limited (2020) eKLR, the court observed that.‘…This is a second appeal. I am alive to my duty as a second appellate court to determine matters of law only unless it is shown that the courts below considered matters they should not have considered, or they failed to consider matters they should have considered, or, looking at the entire decision, it is perverse. 23.In Twaher Abdulkarim Mohammed vs Independent Electoral and Boundaries Commission & 2 others (2014) eKLR, the Court held that a decision is erroneous in law if it is one to which no reasonable tribunal properly directing itself could have arrived at. Which means that the decision must disclose an erroneous exposition of the law, including the duty to properly analyze the evidence led. 24.I have examined the Appellant’s Memorandum of Appeal, wherein it is alleged that the court did not properly analyze the evidence, thereby arriving at an erroneous decision in law. To my mind, that discloses a point of law that properly grounds the appeal. 25.The appeal proceeded by way of written submissions, and both parties filed their respective submissions. 26.The Appellant submitted that the trial court’s refusal to award interest is what prompted the filing of the appeal. 27.The Appellant submitted that the Subordinate Court’s determination was based on documents adduced before it by the parties. 28.The Appellant submitted that the Subordinate Court misdirected itself as the Appellant’s exhibits were clear on the issue of interest. 29.Reference was made to the loan application form, personal loan agreement, and acknowledgement of debt, which all evince payment of interest. 30.The Appellant pointed to the Loan application page 23-30 paragraphs 5 (iii) and (iv) where interest is captured, Personal loan agreement (page 31 of the Record of appeal), at Roman numerals iii and iv, and also in the acknowledgement of debt dated 18th November 24 (page 33 of the Record of appeal) 31.The Appellant placed reliance on section 97 of the Evidence Act, chapter 80, Laws of Kenya, for the proposition that documentary evidence is conclusive of its contents. 32.In response, the Respondent submitted that the Appellant did not pray for interest at the rate of 30% per month in its statement of claim and is bound by their pleadings 33.The Respondent also submitted that the agreement was illegal as the Appellant was not licensed to conduct the business of charging interest on money lent, the same being contrary to section 3 of the Banking Act 34.The Respondent also submitted that the interest claimed is unconscionable, contrary to law and public policy. 35.It was the Respondent’s submission that the contract is unenforceable. 36.The Respondent relied on several cases for that proposition, including the case of Cornelia Nabwanabangala vs Molyne Redit Limited (2019) eKLR, Kennedy Ongiro Mogire and 2 others vs George Morara Nyagate and 2 others (2020) eKLR, where it was held that loans made by moneylenders in contravention of statutory provisions are irrecoverable 37.For the proposition that a 30% interest rate is unconscionable, the Respondent relied on the Court of Appeal decision in Margaret Njeri Muiruri-vs-Bank of Baroda (Kenya) Limited, NRB Civil Appeal No. 282 of 2004 (2014) eKLR, The case of Finance Company Limited vs Ngeny and another (2002) 1KLR. Strydom vs. Vendside Ltd (2009) EWHC 2130 (QB), Commercial Bank of Australia ltd-vs-Amadio (1983) 51 CLR 447 38.I have considered both submissions. I believe the only issues for determination is whether the Appellant is entitled to payment of interest and at what rate on the amount found due to the Appellant by the trial court, and whether the agreement between the parties was enforceable. 39.The Appellant’s appeal is limited to the issue of interest. Because the Respondent did not appeal the dismissal of her counterclaim, the Court cannot reconsider the dismissal of the counterclaim since it is not a subject of the appellate proceedings. 40.I find it apt to consider the enforceability of the agreement first for obvious reasons; 41.The provisions of Section 3 of the Banking Act prohibit a person from carrying on "banking business" or "financial business" without a licence. 42.However, the statutory definitions of banking and financial business focus on the acceptance of deposits from the public and the employment of those deposits by lending or investment. 43.I say so because the long title to the Banking Act provides as follows;‘…An Act of Parliament to amend and consolidate the Law regulating the business of banking in Kenya and for connected purposes…’ 44.So that it is clear, the purview of the Act is Banking and connected purposes. 45.In its interpretation clause, the Act defines Bank, banking business, and financial business as follows;“bank" means a company which carries on, or proposes to carry on, banking business in Kenya, but does not include the Central Bank;"banking business" means—(a) the accepting from members of the public of money on deposit repayable on demand or at the expiry of a fixed period or after notice;(b)the accepting from members of the public of money on current account and the payment on and acceptance of cheques;(c)the employing of money held on deposit or on current account, or any part of the money, by lending, investment or in any other manner for the account and at the risk of the person so employing the money; and(d)such other business activity as the Central Bank may prescribe;"financial business" means—(a)the accepting from members of the public of money on deposit repayable on demand or at the expiry of a fixed period or after notice; and(b)the employing of money held on deposit or any part of the money, by lending, investment or in any other manner for the account and at the risk of the person so employing the money;"Financial institution" means a company, other than a bank, which carries on, or proposes to carry on, financial business and includes any other company which the Cabinet Secretary may, by notice in the Gazette, declare to be a financial institution for the purposes of this Act; 46.Accordingly, unless the Respondent proves that the Appellant was carrying on a deposit-taking or banking business requiring a licence, the mere fact that the Appellant may have been unlicensed ipso facto may not render the loan agreement illegal. 47.There is clearly a difference between the business of lending money and carrying out a banking business. 48.This distinction was brought out by the court in John G. Kamuyu & Another v Safari 'M' Park Motors [2013] eKLR, where Lady Justice Nyamweya, as she then was, held that the Banking Act primarily regulates institutions engaged in deposit-taking and the utilisation of those deposits and does not apply to the mere lending of money by a private person. 49.A person who advances his own money to another person under a private loan agreement is not necessarily conducting banking business within the meaning of the Banking Act. 50.I also note that the Appellant provided evidence of the Central Bank of Kenya permitting the registration of the Appellant as a money-lending business. 51.I have reviewed the documents presented before the Small Claims Court, and I am satisfied that they demonstrate not only an applicable interest rate of 30% per month, which translates to 360% per annum, but also a late fee of khs 1000 to be charged daily. 52.It is correct as submitted by the Appellant that Courts generally uphold freedom of contract, including agreed interest rates. 53.However, courts retain equitable jurisdiction to refuse enforcement of terms that are oppressive, penal, extortionate, unconscionable, or contrary to public policy. 54.I find that an interest rate of 30% per month, which translates to 360% annual rate, is not a genuine commercial rate but a punitive and unconscionable rate designed to punish default rather than compensate for delayed payment. 55.I find that the agreed default interest of 30% per month is so oppressive, extortionate, or unconscionable as to justify judicial interference. 56.I have already found that the Subordinate Court misdirected itself by finding that there was no provision for payment of interest on late payment, which was a term agreed upon by the parties and evident from the documents presented before the said court. 57.I therefore find that the Appellant is entitled to payment of interest on delayed payments. 58.I also find that the interest rate of 30% per month is contrary to public policy, is unconscionable, and liable for judicial intervention, being way above commercial rates as regulated by the government of Kenya. 59.Since it is evident that the trial court misdirected itself in law by ignoring the evidence of agreement between the parties on payment of interest and further erred in denying the Appellant payment of interest on the amount found due. 60.I find that the Appellant has made out a case for setting aside the subordinate court’s decision not to award the Appellant interest on amounts found due from the Respondent. 61.And since I have also found the claimed interest rate of 30% per month unconscionable and contrary to public interest, I decline to award the Appellant payment of interest at the rate of 30% per month. 62.In the circumstances of the case and in the exercise of discretion, I order as followsThe decision of the Subordinate Court denying the Appellant interest on the amount of KShs 98,000 found due and owing to the Appellant in its judgment delivered on 12th June 2025 is hereby set aside.The Respondent shall pay the Appellant interest at court rates on the judgment amount of KShs 98,000 from the date of institution of the suit at the subordinate court until payment in full.The Appellant shall have the costs of the Appeal. DELIVERED, SIGNED, AND DATED THIS 9TH DAY OF JUNE 2026EMMANUEL BITTAJUDGE OF THE HIGH COURT