Developing Jurisprudence on the Registration, Licensing and Enforcement Rights of Foreign Lenders in Kenya

Kenyan courts have recently delivered two important judgments concerning cross-border lending. We have already published an article on the Court of Appeal’s decision in Stichting Rabobank Foundation v AVA Chem Limited & Christopher Irungu Mwangi, Civil Appeal No. E090 of 2025, [2026] KECA 1550 (KLR) (31 July 2026) (Rabobank), in which the Court of Appeal upheld a foreign lender’s standing to enforce its rights.

Before Rabobank, in July 2026, the High Court of Kenya had, in Lenana Innovative Solutions Limited & 3 others v WLB Asset II D Pte Ltd & another, Constitutional Petition No. E078 of 2025 (Lenana), rejected an attempt by the petitioners to invalidate USD 17 million of financing advanced by lenders incorporated in Singapore and Mauritius on, among other grounds, the argument that the lenders were not registered or licensed in Kenya.

Brief facts of Lenana

Between December 2022 and January 2024, Lenana Innovative Solutions Limited (LISL) obtained financing of USD 5 million from WLB Asset II D Pte Ltd, a Singapore incorporated entity and USD 12 million from WLB Asset VI Pte Ltd, a Mauritius incorporated entity.

It was undisputed that LISL received and utilised the full USD 17 million loan advanced by the lenders. Following the borrower’s default, LISL sought to restructure the loan, but the lenders declined the proposal. The petitioners subsequently challenged the validity of the lending arrangements before the High Court.

Their key contention was that the lenders were neither registered nor licensed in Kenya and that the loan and security arrangements were therefore invalid or unenforceable.

The High Court determined four issues in Lenana:

1. whether a foreign dispute resolution clause in the underlying finance documents can oust the jurisdiction of Kenyan courts in matters involving questions concerning the Constitution of Kenya;
2. whether a foreign lender is required to register in Kenya before lending to a Kenyan borrower or taking collateral from a Kenyan security provider;
3. whether section 6(4) of the Movable Property Security Rights Act (No. 13 of 2017, Laws of Kenya) (MPSRA) is unconstitutional; and
4. whether a borrower who has received and utilised loan proceeds can later deny a lender’s standing to enforce the transaction.

High Court’s Decision in Lenana

A foreign arbitration clause does not exclude the High Court’s constitutional jurisdiction

The lenders urged the court to reject the constitutional petition on the basis that the parties had agreed in the underlying finance documents that any dispute arising from the financing would be determined by arbitration in a tribunal seated in Singapore.

The High Court disagreed. It held that the legal capacity of the lenders and the constitutional validity of section 6(4) of the MPSRA were Kenyan public law questions that fall within the jurisdiction of the High Court and could not be determined by a private arbitral tribunal seated in Singapore.

It is important to note that even though the court admitted the constitutional petition challenging the validity of the MPSRA, the remainder of the dispute between the parties remained a commercial dispute to be determined under private law.

The practical implication is that while parties in a cross-border transaction involving a Kenyan counterparty have the freedom to choose foreign governing law and foreign dispute resolution forums for private law matters, Kenyan courts retain jurisdiction to determine public law questions, such as the constitutional validity of a Kenyan statute, that may arise from the transaction.

The lenders were not required to register or get licensed in Kenya on the facts presented

The High Court examined various arguments advanced by the borrower to challenge the loan on this ground.

Non-registration under section 974 of the Companies Act

Like in Rabobank, the petitioners claimed that unregistered and unlicensed foreign lenders cannot lawfully lend or take security from a Kenyan obligor.

Section 974 of the Companies Act (No. 17 of 2015, Laws of Kenya) (Companies Act) requires a foreign company to register before carrying on business in Kenya. In Lenana, the High Court held that the lenders were not ‘carrying on business in Kenya’ merely by lending to LISL and taking security. The lenders were therefore not subject to registration requirements under section 974 of the Companies Act on the facts before the court. This is the same approach that the Court of Appeal later took in Rabobank, as highlighted in our article.

Conduct of financial business in Kenya without a valid licence

The petitioners argued that the lenders were carrying out regulated financial business in Kenya without a valid licence. The High Court rejected this argument. Based on the facts presented, the lenders did not take deposits from any Kenyan resident and were therefore not required to be licensed by the Central Bank of Kenya under the Banking Act (Cap. 488, Laws of Kenya).

Non-registration under the Bills of Exchange Act, Foreign Investment Protection Act and Tax Procedures Act

Further, the petitioners relied on wider statutory non-compliance arguments under the Bills of Exchange Act (Cap. 27, Laws of Kenya) (Bills of Exchange Act), Foreign Investments Protection Act (Cap. 518, Laws of Kenya) (FIPA) and Tax Procedures Act, No. 29 of 2015 to invalidate the loan. They argued that the lenders ought to have registered in Kenya under these statutes before advancing a loan to LISL.

The High Court held that, in substance, none of those statutes required the lenders to be registered or licensed in Kenya, nor deprived them of capacity to contract, lend, take security or enforce their rights on the facts before the High Court.

In particular, the High Court held that:

• an entity validly existing under its jurisdiction of incorporation has capacity to be a party to a bill, including a Kenyan law governed promissory note, under section 20 of the Bills of Exchange Act. The requirement under that section for the entity to have capacity ‘under the law for the time being in force relating to corporations’ refers to the law of the entity’s place of incorporation; it does not automatically require registration in Kenya;
• registration under FIPA is optional for foreign entities that wish to access the benefits of Kenya’s investment protection regime; and
• since the obligation to withhold tax from interest payments is imposed on a Kenyan resident payer, a foreign lender does not become tax resident in Kenya, or become required to register in Kenya, merely because it has advanced a loan to a Kenyan resident borrower.

Conduct of regulated lending in Kenya without a valid licence

In addition, the High Court considered the argument by the petitioners that the lenders could not lend to Kenyan borrowers as the lenders were not licensed under the Business Laws (Amendment) Act 2024 and the Central Bank of Kenya (Digital Credit Providers) Regulations 2022.

The court rejected the borrower’s reliance on these two legal instruments to challenge the loan on the facts before it. In any case, the broader non-deposit-taking credit provider regime introduced by the Business Laws (Amendment) Act, 2024 post-dated the transaction and could not be applied retrospectively absent clear statutory language.

This position restates a well-recognised regulatory principle that legislation generally operates prospectively rather than retrospectively. Nevertheless, lenders entering into future financing transactions involving a Kenyan obligor should carefully assess the impact of the evolving non-deposit-taking credit provider regulatory framework, as we noted in the Rabobank article.

The court’s analysis and response to each of these arguments raised by the petitioners is instructive. A Kenyan court will examine a dispute based on the specific facts of a transaction. A different outcome may be reached if, for example, a foreign lender has an office, employees, an established place of business, regular local origination or servicing activity, extensive Kenyan marketing, or a sustained operational presence in Kenya, as these factors could persuade a court to find that the foreign entity is carrying on business in Kenya.

Section 6(4) of the MPSRA is constitutional and protects validly created security rights

The petitioners argued that section 6(4) of the MPSRA was unconstitutional because, in their view, it permits security rights in a security agreement to remain enforceable even where a party to the relevant transaction documents has not complied with requirements imposed by any other written laws in Kenya.

Section 6(4) of the MPSRA provides that:

“A security agreement entered into in accordance with this section is enforceable and creates a security right, irrespective of the satisfaction of the requirements that may be imposed by any other written law.”

The High Court rejected the constitutional challenge. It held that the legitimate purpose of section 6(4) of the MPSRA is to protect a validly created security right from being invalidated by unrelated statutory formalities that do not concern the existence of the underlying secured obligation or the security agreement. The High Court clarified that section 6(4) does not dispense with the MPSRA’s own requirements for the creation of a security right; nor does it insulate a lender from statutory consequences that may arise from breach of another applicable law.

This position taken by the court is important as it clarifies that a validly created security interest is not vulnerable to attack simply because some unrelated statute was not complied with by the lender in connection with the wider transaction. That non-compliance may carry its own consequences under the statute, but it does not unwind the security right itself.

A borrower cannot retain the benefit of the loan and opportunistically deny the lender’s standing

Lastly, the petitioners’ attempt to challenge the lenders’ locus standi in the petition was rejected. The High Court held that the petitioners could not institute proceedings against the lenders and later claim that those same lenders lacked the capacity to defend the proceedings.

Perhaps the most notable pronouncement by the High Court on this issue was its treatment of the doctrine of unjust enrichment. Drawing on the principle of restitution, and in particular the reasoning in National Bank of Kenya Ltd v Anaj Warehousing Ltd [2015] KESC 4 (KLR), the court reaffirmed that a technical defect in the creation or enforcement of security does not entitle a borrower who had obtained and utilised proceeds of a loan to retain the loan proceeds without repayment. The court held that even if the petitioners’ arguments regarding the alleged illegality of the loan had succeeded, restitution of the principal sums advanced would still have been due under the doctrine of equity.

The practical message is that a borrower cannot draw down a facility, spend proceeds of such a facility, default but then retrospectively engineer a lack of capacity or non-registration defence against the lender. This provides meaningful comfort to lenders as the court affirmed that equity will not permit a borrower to retain the benefit of loan proceeds without making restitution.

Conclusion

The decisions in Lenana and Rabobank support a more stable enforcement mechanism in cross-border financing arrangements involving a Kenyan party. Kenyan courts are reluctant to accept arguments by borrowers that a lender’s enforcement rights in Kenyan courts should be denied simply because a foreign entity has not been registered or licensed in Kenya. Whether the registration or licensing of the foreign entity is needed is a separate matter altogether, to be determined based on the specific facts. Foreign lenders should therefore assess their activities in Kenya against Kenya registration and licensing frameworks as a risk mitigation exercise. If in doubt, they should obtain specific professional advice prior to finalising the transaction. For practitioners, Rabobank and Lenana call on us to revisit our enforceability opinions. As these opinions play an important role in the closing of cross-border financing transactions, the emerging jurisprudence provides welcome guidance on how Kenyan courts are likely to approach questions of registration, licensing and enforcement involving foreign lenders.

This article is prepared for general information. It is not, and does not aim to be, comprehensive. Given the general nature of its content, it should not be considered legal advice. For specific advice, please contact [email protected] in our Kenya office