Bank loans law calls for review of conflict of interest situations

I am unsure whether the recently signed Banking Amendment Act 2016 capping bank loan rates and other banking rates will be effective.

But it is clearly popular with a huge number of Kenyans who have been saddled with unpredictable loan repayments and other policies that favour banks at the expense of consumers.

But I do know that President Uhuru Kenyatta did the right thing in signing rather than rejecting the law.

Not because it was popular, but because rejecting it would have resulted in loud complaints about conflict of interest by Mr Kenyatta as his family has a significant footprint in the banking industry through, for example, the Commercial Bank of Africa.

In fact, because of these interests, the banking sector was caught flat-footed, having expected Mr Kenyatta to side with them on this very profitable, and easy, path to wealth.

What would have been even better, proper and in keeping with the spirit of the Constitution, was for Mr Kenyatta to publicly declare his conflict of interest in the process.

Mr Kenyatta was clearly reluctant to sign the Bill, and initial reports — that looked suspiciously like trial balloons flown to test the public mood, complete with quotes from unnamed ‘State House’ sources — had him trying to find a middle way between outright rejection, and signing.

But with a year to elections, rejecting the Bill would have been massively contentious and provided highly combustible propaganda.

Conflict of interest arises when an official has to make a decision that brings real or potential personal benefit to the decision-maker.

But it is also about perception or appearance of conflict of interest whether it exists or not.

Most civilised countries and non-family corporations set out policies to mitigate the real or perceived conflict of interest.

PERSONAL INTERESTS
These could be public declarations of potential conflict of interest, which Mr Philip Kinisu should have done before taking up the Anti-Corruption position.

Also, decision makers could recuse themselves or add others to the decision making process so that no one person can alone make a decision.

In the context of assenting to Bills, this must mean that the decision maker should not reject what Parliament has decided if rejection would appear to benefit his personal interests.

In theory, the power of assenting to Bills is given to mitigate the possible tyranny of the majority in Parliament in case laws are passed that benefit a few, are glaring unfair, or are unconstitutional, for example.

But when there is a glaring conflict of interest, then the right thing to do is simply sign what the majority have passed.

Conversely, conflict of interest rules also dictate that when a law is passed that confers a real or potential benefit to the assenter, the assenter should veto or reject the Bill.

But in Kenya our leaders have tended not to care about conflict of interest, whether in the Executive and Parliament, as the rise of ‘tenderpreneurs’ illustrates.

We have seen our MPs set their own salaries, hence the creation of the Salaries and Remuneration Commission (SRC) to set all public service salaries.

But despite the letter and spirit of the Constitution to ensure there was no conflict, our MPs then essentially ‘white-mailed’ the SRC to get exactly what they wanted.

And we saw a similar conflict of interest issue when former President Mwai Kibaki assented to a Bill increasing his pension and entitlements just before he left office.

RIGHT MOVE
This sense of impunity and mta do? attitude is the perfect breeding ground for the wanton corruption in the country, from traffic police to the very top of the regime.

Even though Mr Kenyatta did not cite potential or real conflict of interest in refusing to assent to the banking amendments, he has set a new precedent which he will hopefully continue, difficult though that may be in his particular circumstances.

For given the vast economic, commercial and financial interests of the Kenyatta family, there could be quite a lot of policies and or laws — from dairy, tourism and education sectors, for example — that could bring real or potential benefit to the vast companies.

If Mr Kenyatta can avoid conflict of interest decisions, that will be a first step in truly fighting corruption beyond rhetoric.

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