Cheaper???

Processing, Profiling, Validating and due diligence on collateral etc. × 100 is cheaper???

Then chasing after some of the 1000 fellows who have not paid, Paying 1000 lawyers to follow 1000 defaulters (or even just 300 of them), 1000 (or say 300) court ocases????

Banking is like insurance, what you want is to spread your risk around. The biggest risk for banks is concentration risk.

Secondly banks that grow sustainably are those that move their incomes from funded (interest income) to none funded (fees & commissions) income. You achieve this by selling small loans to more people hence earning more processing fees etc.

By the way all those those processes you listed up there are charged by the bank and are not given free of charge, so the more income for you.

Using your example, should your single customer default, you would have to shut down your bank

There you go. You can't shoot your own foot .

President Uhuru is not going to sign that bill!!!

Any finance/economics guy will tell it would be a tragedy to individual loan seekers and SMEs.
Interest rates among other things depend on the risk profile of the client. If the rate is capped, the banks would focus on the least risky customers first - the government and blue chip companies. SMEs and individuals would follow if there is money left.

And why would I want to lend to 10,000 entities Kshs. 100,000/= each while there is a single entity (with a better risk profile) that is willing to take the entire billion???