Tame bank lending rates

What you need to know:

  • Prof Ndung’u’s successor will find a very full in-tray.
  • Banks have done little to convey the benefits to borrowers by cutting interest rates.

The race to replace retired Central Bank Governor Njuguna Ndung’u is ushering in an interesting phase in Kenya’s banking industry.

For the first time, the man or woman expected to steer Kenya’s monetary policy will be appointed through an interview by the Public Service Commission in contrast to the past where the President hand-picked individuals to run the Central Bank.

While Kenyans expect thorough vetting of the five shortlisted applicants, it should not be lost in memory that Prof Ndung’u’s successor will find a very full in-tray.

Whereas the economy has been booming and is slated to register six per cent growth this year according to the World Bank, an expensive credit regime in the country is holding back the momentum, hitting both big industries and small ventures hard.

The Central Bank’s inability to enforce a cheaper lending regime has left many investors frustrated.

One wonders why, for instance, two months after the Central Bank’s monetary policy committee cut Kenya Banks’ Reference Interest Rate from 9.13 per cent to 8.54 per cent, the banks have done little to convey the benefits to borrowers by cutting interest rates.

From the new governor, Kenyans demand an efficient system that will rein in commercial banks’ untamed appetite for profits at the expense of borrowers and the economy.