Bankers urge Uhuru to reject law capping interest rates
President Uhuru Kenyatta attending the Energy Summit held at State House in Nairobi on July 27, 2016. Bankers have urged him to veto la Bill seeking to cap interest rates. PHOTO | EVANS HABIL | NATION MEDIA GROUP
What you need to know:
- A statement from the Kenya Bankers Association (KBA), the umbrella body of commercial banks in the country, said they are working to lower interest rates without the need for legislation.
- MPs who supported the Bill and traders have argued that banks have been using the current regime, which gives them a free hand in determining interest rates, to rake in profits at the expense of borrowers.
- But in seeking to pre-empt the passage of the Bill, banks, which argue that limiting interest rates will in fact raise the cost of credit, issued a statement last week in which they offered to create a Sh30 billion loan kitty for small businesses.
Bankers on Tuesday evening continued to lobby President Uhuru Kenyatta not to sign a proposed law that could cap interest rates.
A statement from the Kenya Bankers Association (KBA), the umbrella body of commercial banks in the country, said they are working to lower interest rates without the need for legislation.
“As we await the decision on the matter, the banking industry, through the Kenya Bankers Association, welcomes the opportunity to reengage with the Parliamentary Committee on Finance, Planning and Trade, towards responding to the concerns of the public whilst addressing the issue of interest rates in a sustainable way.
“We therefore believe that the referral of this Bill back to Parliament offers the stakeholders an opportunity to reach a long-lasting solution that supports Kenyans and builds our economy,” the KBA said.
The continuing lobbying by banks follows the submission of the Banking Act (Amendment) Bill to President Kenyatta, who has 14 days to sign it into law, veto it or return it to Parliament with recommendations.
If he signs it, it will mean commercial banks cannot charge interest rates rates beyond 4 per cent above the Central Bank Base Rate, now at 10.5 per cent.
It also means that all fees and charges will have to be revealed to borrowers.
MPs who supported the Bill and traders have argued that banks have been using the current regime, which gives them a free hand in determining interest rates, to rake in profits at the expense of borrowers.
But in seeking to pre-empt the passage of the Bill, banks, which argue that limiting interest rates will in fact raise the cost of credit, issued a statement last week in which they offered to create a Sh30 billion loan kitty for small businesses.
The KBA also said banks have voluntarily lowered interest rates, adding that more discussions on how to reduce these rates can occur without a law limiting what banks can charge.
