Legal Options When Relatives Refuse to Repay Loans in Kenya

Lending money to relatives without formal documentation is common in Kenya, but complications arise when repayment is refused. Despite the absence of written contracts, Kenyan law recognises oral agreements as legally binding, provided there is sufficient proof that the money was a loan and not a gift.

Proving a Loan Without a Written Agreement

Fridah Muriithi, a commercial law associate at MMTK Law, explains that the lender bears the burden of proving the loan's existence. Evidence such as M-Pesa or bank transfer records, WhatsApp messages, emails, SMS, acknowledgements of debt, partial repayments, cheques, and witness testimonies can be presented to establish that a loan agreement was made.

A recent High Court ruling in Okongo v Opollo [2025] KEHC 476 (KLR) demonstrated how courts evaluate oral loan agreements. In this case, the court upheld the lender's claim of Sh497,000, relying on transfer confirmations and the conduct of both parties to confirm the loan arrangement.

Repayment Terms and Legal Remedies

When no repayment date is agreed upon, loans are generally considered repayable on demand. The lender should issue a formal demand letter stating the amount owed and allowing a reasonable period for repayment before initiating legal action.

Kenyan law treats loans to relatives the same as those to unrelated individuals. If the borrower refuses to repay, the lender may pursue civil claims through the Small Claims Court for amounts up to Sh1 million, Magistrates’ Courts for larger sums, or the High Court for claims exceeding Sh20 million.

Mediation is encouraged as a faster, less costly alternative to litigation. If a court judgment is obtained but not honoured, enforcement measures such as attachment and sale of assets or garnishee orders may be applied.

Time Limits and Practical Considerations

Loan recovery claims must generally be filed within six years from when the cause of action arose, as per the Limitation of Actions Act. Litigation costs and the borrower’s ability to repay should be carefully considered before proceeding to court.

Preventive Measures

To avoid disputes, lenders are advised to document loans with a written agreement outlining the loan amount, purpose, repayment schedule, and signatures of both parties. Retaining proof of payment and correspondence confirming the loan helps protect lenders’ interests.