MPs says banks Sh30bn loan offer trick to hoodwink Kenyans

Five MPs on Thursday urged President Uhuru Kenyatta to sign an interest rates Bill, claiming the reaction from banks to the proposed law by offering Sh30 billion in cheap loans to small businesses is a mere gimmick meant to hoodwink Kenyans.

The legislators, three of them from the President party The National Alliance (TNA), said the bankers’ move is also meant to dissuade him from signing the Bill aimed at capping interest rates.

“We are wondering whether this is a genuine change of heart or a knee-jerk reaction to persuade the President not to assent to the Banking (Amendment) Bill,” said Mr Njomo.

Kiambu Town MP Jude Njomo sponsored the Bill passed by the National Assembly two weeks ago and now awaiting the President to sign it or return it to Parliament with reasons and possible preferred amendments.

Mr Njomo was flanked by his TNA counterparts Kimani Ichung’wa (Kikuyu) and Kareke Mbiuki (Maara) and ODM’s Abdikadir Omar Aden (Balambala) and Victor Munyaka (Machakos Town, CCU).

PROMISESNOT KEPT

The lawmakers urged the President to assent to the Bill and ignore the claims by banks that it would harm the economy and would result in the growth of informal, unregulated lending.

Mr Njomo said similar promises have been made over the past 20 years that MPs have been trying to get in place a law to limit interest rates banks can charge on loans.

The introduction of the Kenya Banks’ Reference Rate (KBRR) has also not had much impact on interest rates as promised when it was introduced, said Mr Njomo.

He said that with banks placing stringent conditions on borrowers, the small- and medium-size enterprises (SMEs) that are the targets of the Sh30 billion fund would probably never get the money.

The banks made the commitment on Wednesday, with the joint memorandum of understanding (MoU) handed over to Central Bank Governor Patrick Njoroge.

The lawmakers, however, argued that the MoU has no basis in law and there is therefore no reason to believe that the intended beneficiaries would get the money.

'BUNCH OF CARTELS'

“Unless it is legislated and there are safeguards, it is not something that we can take as a genuine offer,” said Mr Njomo.

Mr Aden, the Balambala MP, said the difference between the rates paid on deposits should not be as high as it is currently in Kenya.

“It is very ironical of commercial banks to come and say they want to give SMEs loans at friendly rates. This is proof itself that the rates you have are not friendly. Banks should just run their business ethically,” he said.

Said Mr Mbiuki, the Maara MP: “Let the President listen to the people of Kenya. Let him not listen to a bunch of cartels. When we as the Jubilee coalition were out there campaigning, one of the things in our manifesto was the lowering of interest rates.”

Mr Ichung’wa, the MP for Kikuyu, said the banks' MoU would need to be anchored in the law to have any effect and be enforceable. He said the banks should have put the amount available at friendly rates at 20 per cent of their loan portfolio.

“We do not trust them, we cannot trust them and we cannot trust something that is not anchored in law,” said Mr Ichung’wa.

They also dismissed notions that the Bill was merely a populist move.

“If they say that it is a populist Bill, tell them their rates are very popular with Kenyans and we represent the Kenyans who are suffering,” said Mr Ichung’wa.