@Yowel, kama huna jibu, dont expose your ignorance. Post #1522 does not answer my question. Let me give you another chance to answer the question. Go ahead, give it a shot, sio mtihani . . . nkt.

Nakumatt has expanded because shylock banks were willing to loan based on poorly done risk assessment. In return, Nakumatt has withheld payments to suppliers running to billions of shillings so as to meet interest payments. Suppliers are forced to borrow from same shylock banks to meet basic running expenses. Then someone tells me rate cap is the cause of Nakumatts problems. Give me a break.

The so called credit crunch is a manipulation by the banks, trying to cause organised chaos. They can only be the losers. The winners are those banks that will put in proper risk assessment policies and follow them.

Case in point, a bank has given me a mortgage on a property outside nairobi. Now, post rate caps, while attempting to refinance with another bank, bank 2 tells me it will be tricky because the property is outside Nairobi. Not my ability to repay, not value of the property vis a vis refinance sort, but, location of property. Thats nonsense in my opinion.

@Mainat, the reality will only sink in when the economy takes his job

To be honest, the pro and anti-cap debate is not new and is as old as economics theory has been around. What I know is this. A bank’s primary role in an economy is to take credit risk in exchange for interest rate payment. Unless you as GoK think you have a better understanding of credit risk, you should stay out.
Even an idiot, can see what uhuruto did was a populist move which has no in place in the proper functioning of an economy.

And none of their economics/finance/treasury guys supported them. They ALL actually opposed the idea!!! The decision was as political as they come.

It makes me sad to read some of the things apparently educated people write. Ni kama kusoma ni kunywa maji..

When Uhuru was signing the bill He did comment it will be reviewed after 2 years. Just after you have voted.. ...the rate limit cap will be lifted in 2018.

@tom_boy, kuwa mpole bwana.

Currency exchange rates are determined by a number of factors e.g. interest rates, current account on balance of payments, economic growth, relative inflation rate etc. Now looking at interest rates in isolation: if Kenyan interest rates rise, it shall become more attractive to save in Kes, thus a demand for the currency thus appreciation, but the KES is not a major currency and no one will dare do what ive explained considering the fragile nature of third world countries where savings could be wiped out in a flash.

Now, answering your question based on the current situation: most emerging economies have borrowed in USD, i.e. both governments (read Eurobond in kenya, Nigeria, Ghana etc) and even the private sector. When the US raise their interest rates, investments and funds shall start trickling back at the expense of other countries, demand for the dollar shall rise and the USD shall appreciate and other currencies shall depreciate (KES etc).

These shall be the effects:

1) investment shall be withdrawn by foreigners, a capital outflow which shall affect key investments both in the private sector and public sector.

2) repayment of debt shall be more expensive since the govt source of revenue is kes and repayment of debt is in usd, thus it shall take more kes to buy the same dollar. Thus the govt shall borrow more, still in Kes to meet the obligation, this shall cause interest rates to rise and the debt burden to increase even further. (For Kenya this is dangerous considering our budget deficit stands at 9.3% of GDP). For the government to protect the KES it needs to by either buy more dollars or raising interest rates higher crowding out funding for the private sector.

Small people are already humbled.
Let's enjoy the small picture before the prophecy of the Wazua geniuses becomes reality.
For now,we, daft people are happy!

Yes trump,Iam buying banks next year when reality sinks.I expect a mean dividend on bank stocks this year