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Law Capping interest rates
Rank: Elder Joined: 7/23/2008 Posts: 3,017
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MaichBlack wrote:And I can see most Wazuans have the villager mentality of "Banks are making billions" at the expense of mwananchi.
When a bank with assets of 566 Billion makes a profit of 16 Billion, what is grand about that??? That is a MERE 2.83% ROA!!! But you can bet your average Kenyan will just see the 16 Billion!
Financial literacy should be made compulsory in Primary and High School. It would serve people better than "If a train leaves mombasa at 9:00am and another one leaves Nairobi at 9:30am bla bla bla..." kind of questions. Don't be arrogant, stop prescribing for kenyans what you think they need. We are looking for solutions to real life problems and not lectures on the supply and demand curves. Most of the money banks lend belong to people and not bank owners as you are trying to tell us here. "The purpose of bureaucracy is to compensate for incompetence and lack of discipline." James Collins
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Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
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MaichBlack wrote:githundi wrote:Liv wrote:githundi wrote:mlennyma wrote:githundi wrote:mlennyma wrote:githundi wrote:3.These wanjikus who think they will benefit from low rates will be shocked to find out they will in first instance not qualify for a loan i can see how bitter you feel breaking your points a post after the other instead of a single script,how about earning more interest on deposits? Simple banks reaçtion; preference for huge fixed deposits from corporate and raise operating costs for Wanjikus accounts to cover for the lost revenue... Safaricom is an option for wanjikus small savings if banks raise operating expenses Yes,an option at zero interest rate. Not the 7 %..you are talking about..
I hear that some banks are likely to reduce deposits from Wanjiku, as there will be no need to receive expensive funds and lend them out in a high risk low return environment. So Wanjiku will not win with high returns on her deposits. Yes @ Liv. .that is what may happen Very true!!! These are the kinds of deals that would be taking place. Why would a bank give you 7% while it can source the funds at 2%? And because there will be credit rationing, they will not need as much money/deposits as they do now!!!Wait until banks reject your money. They don't want even your salary to be paid through their bank just in case you refuse to withdraw and start demanding for 7%!!! You are looking at issues with a narrow field of vision. Banks have different products for different purposes. Banks do pay 7℅ and even more on deposits. If you ever held more than KShs 1m in your account, you would know because your bank would have begged you to fix deposit already at 7℅ or more. In fact CFC pays minimum 7℅ on all saving accounts. Currently, only depositors who can negotiate their rates and those who choose the right banks enjoy good rates. If the law extends the benefit to Wanjiku regardless of whether she negotiates her rate or chooses her bank carefully, it's a good law. Life is short. Live passionately.
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Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
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Obi 1 Kanobi wrote:MaichBlack wrote:And I can see most Wazuans have the villager mentality of "Banks are making billions" at the expense of mwananchi.
When a bank with assets of 566 Billion makes a profit of 16 Billion, what is grand about that??? That is a MERE 2.83% ROA!!! But you can bet your average Kenyan will just see the 16 Billion!
Financial literacy should be made compulsory in Primary and High School. It would serve people better than "If a train leaves mombasa at 9:00am and another one leaves Nairobi at 9:30am bla bla bla..." kind of questions. Don't be arrogant, stop prescribing for kenyans what you think they need. We are looking for solutions to real life problems and not lectures on the supply and demand curves. Most of the money banks lend belong to people and not bank owners as you are trying to tell us here. @Obi be careful with our brother @Maich. If you point out his ignorance of basic economics, he responds with insults. At this instance he does not grasp that banks are intermediaries. They collect money from brothers and sisters without immediate use and channel it to the brothers and sisters with immediate needs. Ideally they should just charge a commission for the transaction. Life is short. Live passionately.
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Rank: Elder Joined: 7/21/2010 Posts: 6,183 Location: nairobi
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sparkly wrote:Obi 1 Kanobi wrote:MaichBlack wrote:And I can see most Wazuans have the villager mentality of "Banks are making billions" at the expense of mwananchi.
When a bank with assets of 566 Billion makes a profit of 16 Billion, what is grand about that??? That is a MERE 2.83% ROA!!! But you can bet your average Kenyan will just see the 16 Billion!
Financial literacy should be made compulsory in Primary and High School. It would serve people better than "If a train leaves mombasa at 9:00am and another one leaves Nairobi at 9:30am bla bla bla..." kind of questions. Don't be arrogant, stop prescribing for kenyans what you think they need. We are looking for solutions to real life problems and not lectures on the supply and demand curves. Most of the money banks lend belong to people and not bank owners as you are trying to tell us here. @Obi be careful with our brother @Maich. If you point out his ignorance of basic economics, he responds with insults. At this instance he does not grasp that banks are intermediaries. They collect money from brothers and sisters without immediate use and channel it to the brothers and sisters with immediate needs. Ideally they should just charge a commission for the transaction. it's becoming emotive  "Don't let the fear of losing be greater than the excitement of winning."
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Rank: Veteran Joined: 11/14/2006 Posts: 1,311
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sparkly wrote:MaichBlack wrote:githundi wrote:Liv wrote:githundi wrote:mlennyma wrote:githundi wrote:mlennyma wrote:githundi wrote:3.These wanjikus who think they will benefit from low rates will be shocked to find out they will in first instance not qualify for a loan i can see how bitter you feel breaking your points a post after the other instead of a single script,how about earning more interest on deposits? Simple banks reaçtion; preference for huge fixed deposits from corporate and raise operating costs for Wanjikus accounts to cover for the lost revenue... Safaricom is an option for wanjikus small savings if banks raise operating expenses Yes,an option at zero interest rate. Not the 7 %..you are talking about..
I hear that some banks are likely to reduce deposits from Wanjiku, as there will be no need to receive expensive funds and lend them out in a high risk low return environment. So Wanjiku will not win with high returns on her deposits. Yes @ Liv. .that is what may happen Very true!!! These are the kinds of deals that would be taking place. Why would a bank give you 7% while it can source the funds at 2%? And because there will be credit rationing, they will not need as much money/deposits as they do now!!!Wait until banks reject your money. They don't want even your salary to be paid through their bank just in case you refuse to withdraw and start demanding for 7%!!! You are looking at issues with a narrow field of vision. Banks have different products for different purposes. Banks do pay 7℅ and even more on deposits. If you ever held more than KShs 1m in your account, you would know because your bank would have begged you to fix deposit already at 7℅ or more. In fact CFC pays minimum 7℅ on all saving accounts. Currently, only depositors who can negotiate their rates and those who choose the right banks enjoy good rates. If the law extends the benefit to Wanjiku regardless of whether she negotiates her rate or chooses her bank carefully, it's a good law.
It is good law for Wanjiku, but the banks will be able to collect funds from other countries at a lower interest rates. The multinanational banks will just get cheaper funds from elsewhere to led to their corporate customers. For banks like SCB and Barclays. I would guess they would rather bring shareholder funds to be loaned to the local banks rather than take expensive deposits.... Same way corporates like EABL borrow from their parent company Diageo at near market rates rather than borrowing locally.
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Rank: Veteran Joined: 11/14/2006 Posts: 1,311
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Obi 1 Kanobi wrote:MaichBlack wrote:And I can see most Wazuans have the villager mentality of "Banks are making billions" at the expense of mwananchi.
When a bank with assets of 566 Billion makes a profit of 16 Billion, what is grand about that??? That is a MERE 2.83% ROA!!! But you can bet your average Kenyan will just see the 16 Billion!
Financial literacy should be made compulsory in Primary and High School. It would serve people better than "If a train leaves mombasa at 9:00am and another one leaves Nairobi at 9:30am bla bla bla..." kind of questions. Don't be arrogant, stop prescribing for kenyans what you think they need. We are looking for solutions to real life problems and not lectures on the supply and demand curves. Most of the money banks lend belong to people and not bank owners as you are trying to tell us here.
Obi is right, most of what the banks call assets are deposits they have accumulated from their customers. It is different from amounts invested by the shareholders of the banks. It would however be interesting to see the magnitude of their Return on Capital employed (ROCE) excluding the customer deposits. @Maichblack, maybe you should consider this.
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Rank: Elder Joined: 10/18/2008 Posts: 3,434 Location: Kerugoya
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Madam Administrator, I believe it is time you put this question to a Vote. Let the Citizens vote on two questions: Should his Excellency The President accent to the Njomo (ahem) Bill? Yes or No. Should The Members of Parliament marshal a two thirds majority and make the Njomo Bill Law? Yes or No. Please hold a meeting with The Moderator about this vote because I perceive a turning point on this thread. It is about to go Green unless we all get a valve to vent off our respective frustrations. Are you up to it?
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Rank: Elder Joined: 2/7/2007 Posts: 11,935 Location: Nairobi
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aemathenge wrote:Madam Administrator, I believe it is time you put this question to a Vote.
Let the Citizens vote on two questions:
Should his Excellency The President accent to the Njomo (ahem) Bill? Yes or No.
Should The Members of Parliament marshal a two thirds majority and make the Njomo Bill Law? Yes or No.
Please hold a meeting with The Moderator about this vote because I perceive a turning point on this thread.
It is about to go Green unless we all get a valve to vent off our respective frustrations.
Are you up to it?  Nothing will go green brother  . Now, you just reminded me of what our law says. If son of Jomo doesn't sign, Mpigs might afterall pass this into a law. INTERESTING!!.. Would they? 100% yes. As for the vote, here is mine. I am 100% pro-capping. We can de-cap next year if it hurts Nothing great was ever achieved without enthusiasm.
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Rank: Elder Joined: 7/22/2009 Posts: 7,455
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alma1 wrote:
I know of a guy who took a 80k loan...He travelled out of the country. When he came back this year, he went to the bank, and found that he now owed 500k..
To make things worse, he went to another bank and found that his 200k he had left behind was now 5k...
True story...
These are the fellows you want us to protect with laws??? The fellow REFUSES to pay 80k yet he has 200k in the bank, disappears and wants to find business as usual?? Of course I don't support 200k going to 5k and I don't understand how that would happen (break it down for us. If it is those accounts you are supposed to pay a certain amount, say 1,200/= monthly and get services like standing orders etc. at no charge, he should not be surprised. Explain what happened to the 195k as per the Banks explanation). It is also not funny to have an 80k loan turn to 500k but again, was that due to high interest rates or refusal to pay??? Kindly give us an example of a person who took an 80k loan, paid as required and end up paying 500k. All these examples people are giving are for people who failed to pay the loans. Sijui nani took a loan in 1979 and in 1992 sijui the bank demanded how much. You took a loan and haven't been paying for 13 years??? Are you nuts??? Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Elder Joined: 7/22/2009 Posts: 7,455
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alma1 wrote:
I'd rather have bad credit than pay some fool sijui 5 times what he lent me. My kids are more important than the bank. Wakae ni pesa zao.
That's the spirit!!!! And that is what I have been saying all along. No one forces anyone to take a loan. Wachana na banks na loan zao! Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Elder Joined: 7/22/2009 Posts: 7,455
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Obi 1 Kanobi wrote:MaichBlack wrote:And I can see most Wazuans have the villager mentality of "Banks are making billions" at the expense of mwananchi.
When a bank with assets of 566 Billion makes a profit of 16 Billion, what is grand about that??? That is a MERE 2.83% ROA!!! But you can bet your average Kenyan will just see the 16 Billion!
Financial literacy should be made compulsory in Primary and High School. It would serve people better than "If a train leaves mombasa at 9:00am and another one leaves Nairobi at 9:30am bla bla bla..." kind of questions. Don't be arrogant, stop prescribing for kenyans what you think they need. We are looking for solutions to real life problems and not lectures on the supply and demand curves. Most of the money banks lend belong to people and not bank owners as you are trying to tell us here. Keep your money then. I have suggested this many times on this thread. Will we keep repeating the same stories? You don't like the interest paid on deposits, keep your money! You don't like interest rates changed on loans by a certain bank, don't take their loans. This is not a birth right. Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
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Liv wrote:sparkly wrote:MaichBlack wrote:githundi wrote:Liv wrote:githundi wrote:mlennyma wrote:githundi wrote:mlennyma wrote:githundi wrote:3.These wanjikus who think they will benefit from low rates will be shocked to find out they will in first instance not qualify for a loan i can see how bitter you feel breaking your points a post after the other instead of a single script,how about earning more interest on deposits? Simple banks reaçtion; preference for huge fixed deposits from corporate and raise operating costs for Wanjikus accounts to cover for the lost revenue... Safaricom is an option for wanjikus small savings if banks raise operating expenses Yes,an option at zero interest rate. Not the 7 %..you are talking about..
I hear that some banks are likely to reduce deposits from Wanjiku, as there will be no need to receive expensive funds and lend them out in a high risk low return environment. So Wanjiku will not win with high returns on her deposits. Yes @ Liv. .that is what may happen Very true!!! These are the kinds of deals that would be taking place. Why would a bank give you 7% while it can source the funds at 2%? And because there will be credit rationing, they will not need as much money/deposits as they do now!!!Wait until banks reject your money. They don't want even your salary to be paid through their bank just in case you refuse to withdraw and start demanding for 7%!!! You are looking at issues with a narrow field of vision. Banks have different products for different purposes. Banks do pay 7℅ and even more on deposits. If you ever held more than KShs 1m in your account, you would know because your bank would have begged you to fix deposit already at 7℅ or more. In fact CFC pays minimum 7℅ on all saving accounts. Currently, only depositors who can negotiate their rates and those who choose the right banks enjoy good rates. If the law extends the benefit to Wanjiku regardless of whether she negotiates her rate or chooses her bank carefully, it's a good law.
It is good law for Wanjiku, but the banks will be able to collect funds from other countries at a lower interest rates. The multinanational banks will just get cheaper funds from elsewhere to led to their corporate customers. For banks like SCB and Barclays. I would guess they would rather bring shareholder funds to be loaned to the local banks rather than take expensive deposits.... Same way corporates like EABL borrow from their parent company Diageo at near market rates rather than borrowing locally. Interest rate is not the only factor to consider for foreign loans. Forex rate is another. If you collect your sales in local currencies but have to buy dollars to pay your loans, an adverse forex rate movement will make you wish you borrowed locally. KQ, EAPC, ARM know only too well. Life is short. Live passionately.
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Rank: Member Joined: 2/20/2007 Posts: 767
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Wanjiku does not have to benefit directly from low interest rates. SME's and businesses that qualify for the loans will benefit tremendously, expand and employ more Wanjiku's, export more and grow the economy. The current situation promotes usurious rates to Wanjiku through mobile phones while starving SME' s and established business from getting loans at reasonable rates. The bankers know this but they dont care as long as they are making money. Kenya will be 100 times better with interest rate controll. If banks refuse to take Wanjikus money, I can promise you she will find other places to put it. They must find it difficult....... those who have taken authority as the truth, rather than truth as the authority. -G. Massey.
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Rank: Elder Joined: 9/19/2015 Posts: 2,871 Location: hapo
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MaichBlack wrote:
These are the fellows you want us to protect with laws??? The fellow REFUSES to pay 80k yet he has 200k in the bank, disappears and wants to find business as usual??
Of course I don't support 200k going to 5k and I don't understand how that would happen (break it down for us.
I would not expect you to understand. Even the bank does not understand. Somehow no one understands. You tell me how if I refuse to pay, you come and take 5 times what I had "refused" to pay...Just explain it to us uneducated fellows who don't know finance like you bank fellows. Listen, that is what we call shylocking. There is no other excuse for it. Now you want us to feel bad for these shylocks ati for the sake of the country..Nope! If they don't want to give cheap money to Wanjiku, then wakae na pesa zao. But the government should not just pally around with these thugs as they pretend they are running a legitimate business. Ati poor credit ratings...My friend, stop lying to Kenyans. People with poor credit ratings in banking countries get loans at a higher rate of course that is what is supposed to happen. In Kenya, whether you have poor credit or good credit, you still pay 30% interest and leave your log book and a title deed with these shylocks. Stop cheating Kenyans here about the economy dying coz bankers are broke. No one died as you said, because a bank died. It is not their right to charge shylock rates and get government support. The government's work is to safeguard the rights of Wanjiku, not shylock bankers. If shylock Kenyan banks cannot provide cheaper rates, then let them die. Though we never went to finance school, I'm sure there shall be some Kenyan somewhere who shall come up with a new bank that is not colluding with other shylocks to take their money... Tho! wakwede kambisa!! Thieves are not good people. Tumeelewana?
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Rank: Elder Joined: 3/19/2010 Posts: 3,504 Location: Uganda
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Njung'e wrote:aemathenge wrote:Madam Administrator, I believe it is time you put this question to a Vote.
Let the Citizens vote on two questions:
Should his Excellency The President accent to the Njomo (ahem) Bill? Yes or No.
Should The Members of Parliament marshal a two thirds majority and make the Njomo Bill Law? Yes or No.
Please hold a meeting with The Moderator about this vote because I perceive a turning point on this thread.
It is about to go Green unless we all get a valve to vent off our respective frustrations.
Are you up to it? Nothing will go green brother . Now, you just reminded me of what our law says. If son of Jomo doesn't sign, Mpigs might afterall pass this into a law. INTERESTING!!.. Would they? 100% yes. As for the vote, here is mine. I am 100% pro-capping. We can de-cap next year if it hurts I echo you guka punda amecheka
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Rank: Veteran Joined: 11/14/2006 Posts: 1,311
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sparkly wrote:Liv wrote:sparkly wrote:MaichBlack wrote:githundi wrote:Liv wrote:githundi wrote:mlennyma wrote:githundi wrote:mlennyma wrote:githundi wrote:3.These wanjikus who think they will benefit from low rates will be shocked to find out they will in first instance not qualify for a loan i can see how bitter you feel breaking your points a post after the other instead of a single script,how about earning more interest on deposits? Simple banks reaçtion; preference for huge fixed deposits from corporate and raise operating costs for Wanjikus accounts to cover for the lost revenue... Safaricom is an option for wanjikus small savings if banks raise operating expenses Yes,an option at zero interest rate. Not the 7 %..you are talking about..
I hear that some banks are likely to reduce deposits from Wanjiku, as there will be no need to receive expensive funds and lend them out in a high risk low return environment. So Wanjiku will not win with high returns on her deposits. Yes @ Liv. .that is what may happen Very true!!! These are the kinds of deals that would be taking place. Why would a bank give you 7% while it can source the funds at 2%? And because there will be credit rationing, they will not need as much money/deposits as they do now!!!Wait until banks reject your money. They don't want even your salary to be paid through their bank just in case you refuse to withdraw and start demanding for 7%!!! You are looking at issues with a narrow field of vision. Banks have different products for different purposes. Banks do pay 7℅ and even more on deposits. If you ever held more than KShs 1m in your account, you would know because your bank would have begged you to fix deposit already at 7℅ or more. In fact CFC pays minimum 7℅ on all saving accounts. Currently, only depositors who can negotiate their rates and those who choose the right banks enjoy good rates. If the law extends the benefit to Wanjiku regardless of whether she negotiates her rate or chooses her bank carefully, it's a good law.
It is good law for Wanjiku, but the banks will be able to collect funds from other countries at a lower interest rates. The multinanational banks will just get cheaper funds from elsewhere to led to their corporate customers. For banks like SCB and Barclays. I would guess they would rather bring shareholder funds to be loaned to the local banks rather than take expensive deposits.... Same way corporates like EABL borrow from their parent company Diageo at near market rates rather than borrowing locally. Interest rate is not the only factor to consider for foreign loans. Forex rate is another. If you collect your sales in local currencies but have to buy dollars to pay your loans, an adverse forex rate movement will make you wish you borrowed locally. KQ, EAPC, ARM know only too well.
@Sparkly, that goes without saying. The Forex risk and other risks are part of the analysis for the business case. Borrowing from one country maybe cheaper than another depending on all the variables.
There is an original Greek saying that goes...... Ciri gikuyu itiri ukabi.
EABL borrows from parent company because any loss locally could be a gain to the whole Group. It is different when you borrow from a related party.... The companies you've quoted borrowed offshore from the markets.
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Rank: Veteran Joined: 11/14/2006 Posts: 1,311
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I am against capping of interest rates.
Hypothesis:
The biggest problem we have in kenya and africa is Market availability. We don't have critical mass in demand for most products. Our middle class in Kenya as many other countries is not big enough to consume that would justify mass production of many things. Anyone investing in anything has this in mind.... The market is limited and so most of the investments here are high risk..... This results is high product and service prices to ensure high return.
Banks are not an exception and they receive limited proposals to lend in projects that can make real money for the investors and make returns for them. Because the market for loans is not huge the price of loans is high. The only people who take huge loans are big corporates who are able to negotiate their loans rates close to TB rates. Other than those Wanjiku and SMES do not borrow much as they have no projects that can rely require a lot of money. Most Wanjikus borrow for building projects..... But the middle class is not expanding fast enough to take all the buildings that come to the market...... Low market demand. This is replicated in most sectors of our economy.
Solution:
The government and parliament should look into how to grow the economy in order to expand the middle class and market demand for products and services. If the economy grows at 10% it could shift 500,000 to 1 million or more people from poverty to middle class every year creating demand for products. That would require investment in agriculture and other sectors where most Kenyans operate in order to increase production and export more in order to raise incomes. Higher demand would result in lower production costs generally in a competitive market.
The government should stop borrowing too. Government of Kenya and MPs are living beyond their means. Why do we have to borrow so much to spend in recurrent expenditure? That is the problem, the banks are just reacting to the environment. Remember those days when TB rates were circa 2 %, banks were giving loans at 10-12 %p.a. I remember mortgage by SCB being offered at a fixed rate of less than 9.9%. Those were Kibaki days, economic growth shot up to 7% in 2007 before the PEV set in.
Capping the interest rates will not solve our problems. One of the likely outcome maybe capital flight and and if that happens soon the dollar may hit Kes 150- 200 each.... Then massive inflation, and other social evils that come with it. Returns for owners of capital will not increase but reduce if we cap the interest rates.
Required
Critic constructively (50%)
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Rank: Elder Joined: 9/19/2015 Posts: 2,871 Location: hapo
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Liv wrote:I am against capping of interest rates.
Hypothesis:
The biggest problem we have in kenya and africa is Market availability. We don't have critical mass in demand for most products. Our middle class in Kenya as many other countries is not big enough to consume that would justify mass production of many things. Anyone investing in anything has this in mind.... The market is limited and so most of the investments here are high risk..... This results is high product and service prices to ensure high return.
Banks are not an exception and they receive limited proposals to lend in projects that can make real money for the investors and make returns for them. Because the market for loans is not huge the price of loans is high. The only people who take huge loans are big corporates who are able to negotiate their loans rates close to TB rates. Other than those Wanjiku and SMES do not borrow much as they have no projects that can rely require a lot of money. Most Wanjikus borrow for building projects..... But the middle class is not expanding fast enough to take all the buildings that come to the market...... Low market demand. This is replicated in most sectors of our economy.
Solution:
The government and parliament should look into how to grow the economy in order to expand the middle class and market demand for products and services. If the economy grows at 10% it could shift 500,000 to 1 million or more people from poverty to middle class every year creating demand for products. That would require investment in agriculture and other sectors where most Kenyans operate in order to increase production and export more in order to raise incomes. Higher demand would result in lower production costs generally in a competitive market.
The government should stop borrowing too. Government of Kenya and MPs are living beyond their means. Why do we have to borrow so much to spend in recurrent expenditure? That is the problem, the banks are just reacting to the environment. Remember those days when TB rates were circa 2 %, banks were giving loans at 10-12 %p.a. I remember mortgage by SCB being offered at a fixed rate of less than 9.9%. Those were Kibaki days, economic growth shot up to 7% in 2007 before the PEV set in.
Capping the interest rates will not solve our problems. One of the likely outcome maybe capital flight and and if that happens soon the dollar may hit Kes 150- 200 each.... Then massive inflation, and other social evils that come with it. Returns for owners of capital will not increase but reduce if we cap the interest rates.
Required
Critic constructively (50%) Ahhh now I understand it. What you are saying is that the Kenyatta gov't is worse than the Kibaki and nusu mkate gov't. Somehow within 4 years, Uhuru and his gov't has managed to shrink the economy and lowered demand for bank loans. I'm just happy to see that you agree with what we have been saying all along. Uhuru sio Kibaki. Thieves are not good people. Tumeelewana?
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Rank: Elder Joined: 2/26/2012 Posts: 15,980
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alma1 wrote:Liv wrote:I am against capping of interest rates.
Hypothesis:
The biggest problem we have in kenya and africa is Market availability. We don't have critical mass in demand for most products. Our middle class in Kenya as many other countries is not big enough to consume that would justify mass production of many things. Anyone investing in anything has this in mind.... The market is limited and so most of the investments here are high risk..... This results is high product and service prices to ensure high return.
Banks are not an exception and they receive limited proposals to lend in projects that can make real money for the investors and make returns for them. Because the market for loans is not huge the price of loans is high. The only people who take huge loans are big corporates who are able to negotiate their loans rates close to TB rates. Other than those Wanjiku and SMES do not borrow much as they have no projects that can rely require a lot of money. Most Wanjikus borrow for building projects..... But the middle class is not expanding fast enough to take all the buildings that come to the market...... Low market demand. This is replicated in most sectors of our economy.
Solution:
The government and parliament should look into how to grow the economy in order to expand the middle class and market demand for products and services. If the economy grows at 10% it could shift 500,000 to 1 million or more people from poverty to middle class every year creating demand for products. That would require investment in agriculture and other sectors where most Kenyans operate in order to increase production and export more in order to raise incomes. Higher demand would result in lower production costs generally in a competitive market.
The government should stop borrowing too. Government of Kenya and MPs are living beyond their means. Why do we have to borrow so much to spend in recurrent expenditure? That is the problem, the banks are just reacting to the environment. Remember those days when TB rates were circa 2 %, banks were giving loans at 10-12 %p.a. I remember mortgage by SCB being offered at a fixed rate of less than 9.9%. Those were Kibaki days, economic growth shot up to 7% in 2007 before the PEV set in.
Capping the interest rates will not solve our problems. One of the likely outcome maybe capital flight and and if that happens soon the dollar may hit Kes 150- 200 each.... Then massive inflation, and other social evils that come with it. Returns for owners of capital will not increase but reduce if we cap the interest rates.
Required
Critic constructively (50%) Ahhh now I understand it. What you are saying is that the Kenyatta gov't is worse than the Kibaki and nusu mkate gov't. Somehow within 4 years, Uhuru and his gov't has managed to shrink the economy and lowered demand for bank loans. I'm just happy to see that you agree with what we have been saying all along. Uhuru sio Kibaki. Alma you are out of order and digressing. Liv has solid points give a counter argument and support it. "There are only two emotions in the market, hope & fear. The problem is you hope when you should fear & fear when you should hope: - Jesse Livermore
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Rank: Elder Joined: 9/19/2015 Posts: 2,871 Location: hapo
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murchr wrote:alma1 wrote:Liv wrote:I am against capping of interest rates.
Hypothesis:
The biggest problem we have in kenya and africa is Market availability. We don't have critical mass in demand for most products. Our middle class in Kenya as many other countries is not big enough to consume that would justify mass production of many things. Anyone investing in anything has this in mind.... The market is limited and so most of the investments here are high risk..... This results is high product and service prices to ensure high return.
Banks are not an exception and they receive limited proposals to lend in projects that can make real money for the investors and make returns for them. Because the market for loans is not huge the price of loans is high. The only people who take huge loans are big corporates who are able to negotiate their loans rates close to TB rates. Other than those Wanjiku and SMES do not borrow much as they have no projects that can rely require a lot of money. Most Wanjikus borrow for building projects..... But the middle class is not expanding fast enough to take all the buildings that come to the market...... Low market demand. This is replicated in most sectors of our economy.
Solution:
The government and parliament should look into how to grow the economy in order to expand the middle class and market demand for products and services. If the economy grows at 10% it could shift 500,000 to 1 million or more people from poverty to middle class every year creating demand for products. That would require investment in agriculture and other sectors where most Kenyans operate in order to increase production and export more in order to raise incomes. Higher demand would result in lower production costs generally in a competitive market.
The government should stop borrowing too. Government of Kenya and MPs are living beyond their means. Why do we have to borrow so much to spend in recurrent expenditure? That is the problem, the banks are just reacting to the environment. Remember those days when TB rates were circa 2 %, banks were giving loans at 10-12 %p.a. I remember mortgage by SCB being offered at a fixed rate of less than 9.9%. Those were Kibaki days, economic growth shot up to 7% in 2007 before the PEV set in.
Capping the interest rates will not solve our problems. One of the likely outcome maybe capital flight and and if that happens soon the dollar may hit Kes 150- 200 each.... Then massive inflation, and other social evils that come with it. Returns for owners of capital will not increase but reduce if we cap the interest rates.
Required
Critic constructively (50%) Ahhh now I understand it. What you are saying is that the Kenyatta gov't is worse than the Kibaki and nusu mkate gov't. Somehow within 4 years, Uhuru and his gov't has managed to shrink the economy and lowered demand for bank loans. I'm just happy to see that you agree with what we have been saying all along. Uhuru sio Kibaki. Alma you are out of order and digressing. Liv has solid points give a counter argument and support it. on the contrary murchr, I am on point. I'm actually following the point Liv is making to the dot. Her argument is something to do with the economy shrinking and gov't borrowing causing these interest rates. She then goes on to compare Kibaki's interest rates to Uhuru's interest rates. I am not the one who brought this up, she did.We the rest of the holloi polloi have been saying that banks are corrupt and engaging in illegal shylocking. So we want them tamed. But it seems she knows something we don't. It's either the banks are shylocks or Uhuru's gov't policies are increasing interest ratesYou can't have your cake and eat it too. I fail to see where I'm out of order in this. I actually agree with her. If Uhuru's gov't continues borrowing at the rate it is doing, no amount of capping shall help. The gov't must stop borrowing to fund these useless projects. One of the projects being rewarding Mpigs with more salaries. The gov't is Uhuru's gov't....Ama ulitaka niseme it's Raira's? Thieves are not good people. Tumeelewana?
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Law Capping interest rates
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