Lower lending rates

Sunday March 20 2016

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Opinion is divided among analysts about what the outcome of the Central Bank’s advisory committee meeting on Monday will be.

Many experts expect the Monetary Policy Committee to lower the benchmark lending rate from 11.5 per cent, signalling to banks to lower lending rates.

It is to the credit of key bureaucrats who handle these issues that the Kenyan shilling has not been battered as badly as its peers by the continuing problems in the global economy and that the environment therefore exists where a lending rate cut can be considered.

However, the key concern for Kenyans is not what the Central Bank does but whether commercial banks, especially the big players, will follow the lead and lower the rates at which they lend to long-suffering borrowers.

There is no question that access to credit is one of the most important factors underpinning the health of an economy.

When people can borrow, it means they can afford to invest in productive ventures and spur job creation.

In recent years, however, the big banks have adopted cartel-like behaviour. They were very quick to raise rates when there was a hostile environment in the last quarter of 2015 and are yet to make any revision despite the recent change in circumstances.

This frustration is what has prompted MPs to move to rein in the banking sector.

The question Kenyans will want answered after the Monetary Policy Committee meets on Monday is what tools CBK and treasury can use to force banks to lower the prevailing rates which can only be regarded as extortionate.