Loan agreement in Kenya: Template, Key Clauses and Local Law (2026)

What a loan agreement is under Kenyan law A loan agreement is a contract where one party, the lender, gives money to another, the borrower, who promises to repay it, usually with interest, on agreed terms. In Kenya a loan can be between individuals, between a business and a bank, or between a company and a private lender. The document records the amount, the interest, the repayment schedule, any security, and what happens on default. Kenya has no single statute covering every loan. The rules depend on who the lender is. Lending by a bank is governed by the Banking Act (Cap. 488) and Central Bank of Kenya (CBK) regulation. Digital credit providers are now licensed and supervised by the CBK following recent reforms. A loan between private parties is governed mainly by ordinary contract law. One rule, the in duplum rule, is important for almost every Kenyan loan, so it is covered below. This page is general information, not legal advice. Interest rules, licensing and stamp duty change over time, so confirm the current position with a Kenyan advocate before you sign. ## The local law that shapes the deal The in duplum rule. Under section 44A of the Banking Act, interest on a non performing loan stops accruing once the total interest equals the outstanding principal. In plain terms, for a loan that has gone bad, the interest a bank can recover cannot exceed the principal that was owing when the loan became non performing. Kenyan courts have applied this to protect borrowers from interest running up to figures far beyond what was borrowed. Understand it when you set default interest, because a lender cannot keep piling interest on a defaulted loan without limit. Interest, generally. Parties can agree a rate, but it must be clear. State whether interest is simple or compound, because compound interest needs to be clearly agreed and will not be assumed. For bank lending, the CBK framework and the Banking Act apply. Courts can intervene where interest or charges are unlawful or were added without a clear agreement. Digital and non-bank lenders. Following reforms to the Central Bank of Kenya Act, digital credit providers must be licensed by the CBK and meet conduct and disclosure standards. Check whether a non-bank lender is properly licensed. Security and stamp duty. Security over land is created by a charge registered under the Land Registration Act. A charge by a company over its assets should be registered as required by the Companies Act. Loan and security instruments can attract stamp duty, so confirm the current rate and stamp within the time allowed. ## A loan agreement template you can adapt ```

LOAN AGREEMENT This Agreement is made on [date] BETWEEN [Lender name], of [address] (the "Lender") AND [Borrower name], of [address] (ID/company number [number]) (the "Borrower") 1. THE LOAN The Lender will lend the Borrower KES [amount] (the "Loan"), paid to the Borrower on [date]. 2. PURPOSE The Borrower will use the Loan only for [purpose]. 3. INTEREST Interest is [rate] per cent per [year], calculated [simple / compound] on the outstanding balance. The parties acknowledge the in duplum rule under section 44A of the Banking Act where it applies. 4. REPAYMENT The Borrower will repay the Loan and interest by [number] instalments of KES [amount] on the [day] of each month from [date] until fully repaid on [final date]. Early repayment is [allowed without penalty / subject to notice]. 5. SECURITY The Loan is secured by [a charge over [land title / asset], a personal guarantee by [name]]. The Borrower will perfect and register any charge as required by law. 6. REPRESENTATIONS The Borrower confirms it has authority to borrow, the information it gave is true, and there is no undisclosed default. 7. EVENTS OF DEFAULT The whole Loan becomes immediately due if the Borrower misses a payment for [number] days, breaches a term, becomes insolvent, or gives false information. 8. COSTS AND TAXES The Borrower pays the Lender's reasonable recovery costs. Stamp duty on this Agreement and any security is paid by [party]. 9. GOVERNING LAW AND DISPUTES This Agreement is governed by the laws of Kenya. Disputes will be resolved by [arbitration in Nairobi / the courts of Kenya]. 10. GENERAL Entire agreement, notices in writing, no assignment by the Borrower without consent, variations only in writing signed by both parties. SIGNED by the Lender ____________ SIGNED by the Borrower ____________ Witness ____________

- Compound interest claimed without a clear agreement to it.
- Borrowing from a digital or non-bank lender that is not licensed by the Central Bank of Kenya.
- A charge over land or company assets that is never registered, so the security fails against third parties.
- No stamp duty paid on the loan or security, making the documents harder to rely on.
- No events of default or acceleration clause, so the lender cannot call the whole loan on a missed payment. ## Keeping loan documents and their dates in order A loan agreement is not a document you sign and forget. It carries a repayment schedule, interest terms shaped by the in duplum rule, a charge to register, and covenants to check, and each of those is a date or a task that matters. The work that outlasts signing is tracking those obligations and keeping the agreement, the schedule and the security documents consistent. That is the same problem every finance team has with its contracts: drafting from a reliable template, spotting a clause that leaves the lender or the borrower exposed, editing a term cleanly, and never missing a deadline, all in one place. [Adira](https://adiralaw.com) is built around that single workspace idea, with the deepest coverage today for Indian corporate law and compliance, and other jurisdictions being broadened. Kenya specific depth is on the roadmap rather than in place today, so for a Kenyan loan use the template above and have local counsel confirm it. The point worth taking is that a loan is easier to manage when the agreement, its schedule and its deadlines live together rather than in separate files.