The In Duplum Rule: Origin and Legal Framework

The in duplum rule is a legal principle that limits the accumulation of interest on a debt after it becomes non-performing. Under this rule, interest ceases to accrue once the total unpaid interest equals the outstanding principal — effectively capping the total recoverable amount at double the principal debt. The rule has its origins in common law and has been incorporated into Kenyan law.

In Kenya, Section 44A of the Banking Act (Cap 488) gives statutory effect to the rule. It provides that on a non-performing loan, a banking institution may only recover:

• the principal owing at the date the loan becomes non-performing;

• contractual interest not exceeding that principal amount; and

• recovery expenses legitimately incurred.

By its terms, Section 44A applies to institutions governed by the Banking Act; namely banks and deposit-taking financial institutions.

Applicability of the in Duplum Rule to SACCOs

a)    Strict Statutory Scope:

On its face, the in Duplum rule in Section 44A applied only to lenders that qualify as “institutions” under the Banking Act. SACCOs, while regulated by the Sacco Societies Act and supervised by SASRA, are not banks or deposit-taking institutions under the Banking Act and therefore do not automatically fall within its statutory ambit.

b)    Judicial Extension of the Principle:

Kenyan courts have grappled with whether the in duplum rule’s underlying fairness rationale should apply to non-bank lenders (including SACCOs, microfinance institutions, and other credit providers). In a growing line of decisions, courts have held that the principle is one of public policy and fairness that should not be confined strictly to banks:

In Jelangant & another v Mwananchi Credit Limited (Civil Case No. 374 of 2018) (2023) (KLR) the High Court held that the in duplum rule aims to prevent lenders from treating defaulters as profit machines and should extend to all lenders to avoid discrimination between borrowers from banks and others.

Additionally, the Court pronounced itself on the in Duplum rule as follows;

“the in duplum rule was a principle that was imported into our laws to address a social and public interest issue wherein lenders would target defaulters as profit making machines. The rule is an answer to the need to have a reprieve for borrowers by doing away with exploitation through ensuring that lenders, be they banks, unregulated institutions or private lenders, are motivated to recover debts owed at the earliest opportunity and are limited in what they can recover.”

Consequently, in Mwambeja Ranching Company Limited & another -versus- Kenya National Capital Corporation (2019) (KLR) (supra), the Court of Appeal held:

-“The In duplum rule is concerned with public interest and its key aim was to protect borrowers from exploitation by lenders who permit interest to accumulate to astronomical figures. It was also meant to safeguard the equity of redemption and safeguard against banks making it impossible to redeem a charged property. In essence, a clear understanding and appreciation of the in duplum rule is meant to protect both sides”.

In Orengo -versus- Progressive Credit Limited ( Civil Appeal E034 of 2024) (2026) (KLR) the High Court at Nanyuki emphasised that, although Section 44A does not apply directly, the underlying fairness principle of limiting interest to a reasonable cap ought to apply to all lenders to protect borrowers’ ability to redeem security.

In the tribunal case Kinyua -versus- Fortune SACCO Society Ltd (Tribunal Case No. 140 of 2020) (2022) (KLR) the adjudicator applied the in duplum rule in a SACCO loan dispute, deeming it unconscionable for a SACCO to claim more than twice the principal.

These decisions illustrate an emerging judicial trend: courts are prepared to apply the duplum principle on public policy grounds beyond the strict statutory text, including to non-bank entities such as SACCOs.

The Nexus: Enforcing Law -vs- Avoidable Destruction

a.     Necessary Enforcement of Law:

Legal systems must enforce contracts and protect lenders’ rights to repayment to maintain credit discipline and financial stability. Without enforceability, lenders (including SACCOs) would lack confidence to extend credit, limiting access to finance for individuals and small businesses.

b.    Avoidable Destruction:

However, unchecked interest accumulation when a borrower default can destroy the borrower’s financial capacity and equity; leading to forced forfeiture of property or financial ruin despite partial repayment. The duplum rule anchors enforcement within limits that respect both parties’ interests. Courts have highlighted the rule’s policy goal: to prevent interest from accumulating to “astronomical figures” that make redemption impossible, thereby avoiding the avoidable destruction of debtor rights.

By capping interest once it matches the principal, the rule maintains fairness and proportionality; ensuring lenders still recover what was reasonably lent, while protecting borrowers from oppressive debt burdens.

Fairness to Borrowers on Default

For regulated banks and financial institutions, the statutory in duplum rule offers clear protection: borrowers cannot be charged more than double the principal plus recovery costs on non-performing loans. This provides certainty and safeguards against exploitation post-default.

For SACCO loans and other non-bank credit, fairness depends on judicial interpretation and the specific facts of the case. The trend in recent case law shows courts are willing to apply the duplum principle to SACCO and similar loans where interest charges would otherwise be oppressive. This aligns lending enforcement with public policy and constitutional values (e.g., fairness, reasonable conditions of access to credit).

Thus, while SACCOs may not be strictly bound by Section 44A, the principle that interest must not destroy borrowers’ redemption rights increasingly guides judicial reasoning in debt recovery disputes, promoting fairness in circumstances of default.

Conclusion

The in duplum rule in Kenya is clearly embedded in statute for banks and regulated financial institutions (vide Section 44A of the Banking Act), limiting interest on defaulted loans to no more than the principal plus reasonable costs. While SACCOs are not automatically covered by that statute, judicial interpretation increasingly applies the duplum principle based on public policy and fairness to prevent oppressive interest and protect borrowers’ rights. This creates a bridge between necessary legal enforcement of debt contracts and the avoidance of destruction of debtor equity, promoting fairness where borrowers’ default.