Kenyan Parliament will block repeal of rate cap, lawmaker says

Tuesday June 18 2019

Kenya's Cabinet Secretary for Finance Henry Rotich.

Kenya's Cabinet Secretary for Finance Henry Rotich with his briefcase outside the Parliament Buildings on June 13, 2019 before going to read the 2019/2020 Budget. In his Budget speech, he proposed the repeal of a cap on commercial lending rates. PHOTO | FRANCIS NDERITU | NATION MEDIA GROUP 

REUTERS
By REUTERS
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Kenya’s Parliament will block an attempt to repeal a cap on commercial lending rates, the lawmaker who sponsored the law imposing the cap said on Monday.

Introduced in September 2016, the cap limits lending rates to 4 percentage points above the central bank rate, now 9.0%. It was supposed to cut the costs of credit for businesses and private consumers, boosting access to loans.

In his budget speech to Parliament last week, Finance Cabinet Secretary Henry Rotich proposed repealing the cap. He said it was keeping banks from lending to customers they considered too risky.

ACCESS TO CREDIT

A similar attempt to remove the cap last year was rejected by lawmakers. Jude Njomo, a ruling party legislator who introduced the cap law, said the Treasury was being obstinate.

“These guys don’t want to accept the reality, so they keep on pushing. The reality is that the capping of interest rates is here to stay,” Njomo told Reuters.

He accused the minister of siding with commercial banks, rather than the citizens.

“The law is changed by people who listen to wananchi (citizens) ... That (proposed amendment) will not see the light of day,” he said.

Private-sector credit expanded by 4.9% in the year to April, the central bank said, well below the ideal growth rate of 12% to 15%.

In March, the High Court gave Parliament a year to redraft the law capping rates, saying the original was not in line with the constitution. Njomo said he has drafted a new bill to fix the wording in line with the High Court’s ruling.

“It has already gone through some of the steps it needs to before it is tabled in the House ... we will do it within the time frame that was given by the High Court,” he said.

Kimani Ichung’wah, the chairman of Parliament’s Budget Committee, also said he did not expect the proposed repeal to get through the House.

“The government has a responsibility to protect borrowers,” he added.

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