Thursday, October 17, 2019 - President Uhuru has asked MPs to repeal the law capping interest rates for commercial banks in Kenya.
MPs had initially declined to scrap the rate cap upon a request of the Treasury and Central Bank of Kenya (CBK) Governor, Patrick Njoroge, in the Finance Bill 2019.
However, Uhuru has declined to approve the Finance Bill and sent it back to Parliament for review and won’t sign it as long as it provides for the retention of the interest rate limit.
“The President has not assented to the Bill and has returned it to Parliament for review.
“The issue is the repeal of interest capping law,” Aden Duale, the Leader of Majority in the National Assembly, said and stated that lawmakers will debate and vote on the president’s memorandum in the next two weeks.
MPs approved the Banking Act in 2016 in the wake of a public outcry over high interest rates by banks.
The law capped the amount banks can charge as interest on loans to 4 percentage points above the Central Bank rate.
While it was intended to improve lending terms for consumers, it has instead made lenders more selective in who they provide credit to sending people to borrow from shylocks at even higher rates.
Analysts argue that the Government was the only real beneficiary of the rate cap since banks preferred lending to the Government
CBK Governor, Dr. Patrick Njoroge, who has been a vocal critic of the rate cap says:
“The economy is being choked by interest-rate caps,”
“If you want small and medium enterprises to continue strengthening and employ people, you have to let go of these interest-rate caps.”
Attention now shifts to Parliament where MPs could agree with the president and amend the bill to remove the rate caps, or decide to push the bill through, which would require two-thirds support to overturn the President’s memorandum on the amendments.
“It’s very unlikely that they (MPs) will come up with two-thirds of votes, so we believe that we are in a position, very soon, of overturning the interest-rate caps,” Dr. Njoroge said.
The Kenyan DAILY POST