Nairobi, July 20 -- A court has refused to enforce a 438 percent annual interest charge imposed on a digital loan, signalling closer judicial scrutiny of punitive mobile loan terms even if borrowers voluntarily accept them before receiving credit.

The Small Claims Court in Nairobi ruled that Zenka Digital Limited could not enforce contractual loan terms requiring 36 percent monthly interest, equivalent to 438 percent annually, and a further 1.5 percent daily default charge, translating to approximately 45 per cent monthly. It said the rates were punitive and unconscionable.

"The court finds the claimed interest and penalties to be disproportionate and inequitable. The court therefore declines to enforce them," the judgment said.

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