Tuesday, November 5, 2019 - The interest rate cap law that has been in force since 2016 has been officially repealed after Members of Parliament failed to get the requisite numbers to overturn President Uhuru Kenyatta’s reservations on Finance Bill 2019.
MPs had initially declined to scrap the rate cap upon a request from the Treasury and Central Bank of Kenya (CBK) Governor Patrick Njoroge in the Finance Bill 2019.
However, Uhuru declined to approve the Finance Bill and sent it back to Parliament for review and stated that he won’t sign it as long as it provides for the retention of the interest rate limit.
The MPs, who had earlier amended the President’s text to cushion those already servicing loans from being subjected to high interest rates by commercial banks, were keen to veto the President’s memo but failed to marshal the required numbers.
According to the constitution, at least two-thirds majority or 233 of the 349 MPs must be in the House for a possible veto of a President’s memorandum.
Only 161 out of 349 MPs were in the House at the time the memorandum was being considered, meaning that the matter could not even proceed to the actual vote.
The Finance Bill 2019 will be taken to the President for assent which will signal the return of expensive loans.
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.
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.”
The Kenyan DAILY POST