President Kenyatta backs plan to scrap or modify rates cap law

President Uhuru Kenyatta has backed plans to review the interest rates cap law, saying the policy has failed to increase credit access to traders.

Speaking at the Chatham House in London on Tuesday, President Kenyatta said that the government could scrap or modify the laws limiting the rates so that the provisions do not stifle economic growth and the availability of capital for investment.

“It is clear to all that this was going to be the way to make capital available to SMEs [small and medium enterprises] …at a much more affordable rates. It is now obvious that actually that has not transpired and that is why we need to re-look that law,” said President Kenyatta.

CBK STUDY

The assertion by the Head of State comes against the backdrop of a study by Central Bank of Kenya (CBK) on the impact of the rates cap law on the Kenyan economy that revealed the policy failed to achieve its objective of increasing credit access to SMEs by limiting the cost of borrowing for businesses and individuals.

Further, the study showed a significant decline in loans uptake since the Banking Amendment Act came into effect in September 2016, setting a maximum lending rate at no more than four per cent above the CBK’s base rate which stands at 9.5 per cent.

INCLUSIVITY

President Kenyatta also said that his administration had made progress in achieving inclusive growth, pointing out that the handshake with the opposition leader, Raila Odinga, was a gesture that should be seen in the context of working to deliver for citizens.

“We cannot achieve the social and economic needs of our people in an environment of constant political bickering,” said the President.

He said political competition is an essential component of democracy, but all leaders must rise above the noise and focus on the needs of the people.

“That is the difference between the politics of democracy and mature democracies, the ability to rise above competitive electoral politics to issue-based politics that seek the enhancement of people’s lives and long term peace, stability and prosperity of our nations,” said the President.

TERRORISM

President Kenyatta said democracies cannot flourish where there is lack of security, citing terrorism as one of the biggest threats to democratic nations.

“Our friendship needs to respond to the enemies of democracy, rather than leave the battlefield and retreat behind walls. We have won victories together, disrupted and deterred multiple plots that would have killed many of our citizens,” said the President as he outlined areas for cooperation with the UK.

He said Kenya and the UK must continue to work together to defeat terrorist groups that threaten people and countries.

“We must make it harder for the anti-democratic, hate-filled fanatics who are organising against liberty and trying to turn our citizens into hateful, violent extremists,” said the President.

He called for UK’s support to build stronger initiatives to prevent recruitment into terrorism and to more effectively disengage and rehabilitate foreign terrorist fighters who have defected and returned home. 

“We must also act together to equip our people to counter the threats of weaponised information, which is now perhaps the most insidious tool of the new age,” said President Kenyatta.

The President said Kenyans in the wider diaspora will be able to vote in the 2022 elections since a trial had already been carried out with those in the East African region.