Kenya bankers welcome Uhuru repeal on interest rate cap
Kenya Bankers Association chairperson Joshua Oigara has welcomed the repeal of the interest rate cap which President Uhuru Kenyatta assented to
His statement in the local dailies comes days after President Uhuru Kenyatta signed into law the Finance Bill 2019 which gave the nod for free setting of interest rates by commercial banks.
“We recognize the concerns raised by MPs regarding how the industry will respond to the removal of the interest rate controls and would like to assure the banking public that banks will abide by the law,” Oigara’s statement reads.
The new law has sent jitters across the country as fears arise over the return of expensive loans to Kenyans.
Oigara however noted that as per the law, all existing loan contracts are to be maintained under the same terms.
“We will also continue to engage with policy makers including the Legislature, Central Bank of Kenya and National Treasury as well as private sector stakeholders to ensure that banks play their part in ensuring Kenya’s sustainable economic development that will ensure the private sector has access to finance” he said.
The Kenya Commercial bank CEO also affirmed that financial institutions will maintain their support of enterprise developments and Small Medium Enterprises.
“Banks will continue to act responsibly by enhancing pricing transparency and supporting enterprise development and the MSME sector through such innovations as the Stawi product, which offers competitively priced digital loans for micro and small business owners,” he said.
In a chaotic vote on November 5, Members of Parliament (MPs) left Kenyans at the mercy of banks on the rate charged on new loans.
Majority of MPs had walked out on House sittings to leave a depleted minority, effectively failing to overturn the recommendations by President Uhuru Kenyatta on the repeal of the rate cap.
To retain the rate cap, the Presidential proposal required the opposition of a minimum 233 members but by voting time, only 161 MPs were present therefore the House could not even debate on the matter.
Consequently, the President’s memo recommending the scrapping on the interest cap law automatically sailed through.
President Uhuru Kenyatta had expressed his reservations with the interest rate caps introduced in September 2016.
“It is apparent that the capping of interest rates has caused unintended effects that are significant and damaging to our economy and in particular, the Micro Small and Medium Enterprises (MSMEs) which are the hardest hit,” part of his memo to the MPs reads.
Additional reporting from Kepha Muiruri
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