IMF must be as confused as the rest of us who said this will happen.

Never mind exactly what we said will happen happened. It must be a coincidence that can be explained away somehow or a still a figment of our imagination like it was said to be when we predicted it!!!

IMF must be as confused as the rest of us who said this will happen.

Never mind exactly what we said will happen happened. It must be a coincidence that can be explained away somehow or a still a figment of our imagination like it was said to be when we predicted it!!!

LOL, a sovereign state who needs a loan from the IMF. IMF is granting CBK a $1.5bn standby facility to keep the KES stable, and came to our rescue during the 2011 FX crisis, yet Kenyans are so thankless.

It's like going to a bank, asking your Banker for a facility, mismanaging your personal finances (as our Politicians have mismanaged and looted our finances), and when the Banker tells you to be careful so you are able to pay back, your wife and children start cursing the banker!!

But indeed, we are a sovereign state, with the freedom to make poor decisions if we so choose!

Whether World Bank and IMF et all are colonial masters or not does not take away from the following:

1. Int Rate cap of 4% + CBR has taken away unsecured borrowing in kenya (as one SME put it, better an expensive loan than none at all)
better no credit at all than led to a thief. This is the precedence behind high prevalence of thieving, complacence and coraption in Kenya. Unsecured loans was the highway to defrauding the banks. Kwani, utado nini nisipolipa culture has to be brought to a stop, to unlock lending to entrepreneurs.(Moving money from bank A to B and then C does create no value.) And then, no CBR to reference with. That was shxt Kenyans will look back to and wonder how stupid were these lenders as well as policymakers.

2. Private Sector Credit Growth is lowest it's been in years. If this continues, it will affect Kenya's Growth. Of course,this for sure will sober up prudent banking and thus enabling real economic lending that will spur growth in Kenya.

3. More importantly, Interest Cap as is hand-cuffs the CBK's ability to effectively carry out Monetary Policy. And its well known that manipulation of interest rates is a awful open market monetary operation technique with side effects equivalent to nuke attack. Affecting even the undesired targets and waywire fallback. A tool only used by government to rob the society for failure to adhere to prudent economic practices our government has seen that and has taken a decisive measure to bring that to soberity and heighten the sensititivity it deserved. . Any move in the CBR rate now directly impacts lending rates, which was not the intent.

A. Imagine that CBK wants to increase rates to defend the KES (why defend KES in the first place? You can not defend what you already maligned and butchered at the alter of immoral profits, corporate drunken stupor et al by few thieving and conniving lazy blood sucking leaches) at next week's meeting. If they raise the CBR by 200 bps, that means cost of deposits immediately jump from 7% to 8.4%, while cost of loans jumps from 14% to 16% the next day. This hits mwananchi immediately. An election year like 2017, this means that CBK is less likely to carry out its mandate because the increase in Int rates will be viewed negatively. CBR is supposed to indirectly influence interest rate expectations, not directly.

B. Now imagine that the slowdown in Private Sector Credit Growth scares the CBK, and they decide to stimulate the economy. The correct monetary action would be to reduce rates. If they reduce rates from 10% to 8%, this would mean that the max lending rates that banks can lend are at 12%. This would freeze up borrowing even further, as banks would be even more picky with who they lend to, and demand more collateral! Note that not even GOK can borrow at 12% long term. Fallacy of the highest order, caps are here in the first place because your counter offer was misused, free market. Now every dick, tom and harry knows well there was nothing like free market. All players ganged up to gag up the economically sensible borrower. Why give a gun to someone so eager to shoot you through the pupil of your eye and then turn it on self? Recklessness. Could someone atleast prove to be in control and of the right mind and capacity to handle no caps before arguing about free markets. Caps are our own medicine, prescribed by us to us. we can prescribe what works any day and time if need be including no caps only if it had not failed us so terribly..

No one is saying that the Idea of a rate cap cannot work in Kenya, but the current law restricts lending and also hamstrings CBK's monetary policy. IMF is correct, whether or not they are "colonial masters" thank very much. CBK has a plethora of tools to use to establish an effective fiscal monetary policy that is effective and efficient and should desist amputing our patient simply because they were lazy to manage a single sore finger. We respect our colonial masters, the advice is good but its too late because the patient is at alittle bit different level of diagnosing. Thank you very much.

I suggest they "adjust" the cap and base it on KBRR instead of CBR rate. Also increase the band from 400 bps to ~800 bps.

I miss the days of Barclay's bank, kuja bila chochote. The economy was growing under the able hands of men and women who knew the essence of optimal capital structuring, sio kila kitu loan. Men of vision who earnestly worked to create real economic growth that translated to higher purchasing power and standards of living. Loan ilikuwa kwa mpango, sio kampango Ka kendo, and then you end up with several tumpangos twa upuzi very many orphaned/ npls and bank closures.

Fact - Banks will never stop lending. Our problem is that banks have not invested in mechanisms to rate borrowers. This is because of the previous interest rate largesse that was ill adviced. There was no incentive for responsible lending. For sure, banks are in turmoil but those that re invent their systems will survive and thrive.

Can the anti rate cap crusade explain to me this: If the watchman, earning 6k salary approaches you for a loan of 100k to start farming. Has zero experience in this venture. Would you say, " hmmm, I think you are high risk so let me charge you 30% interest to hegde my risk. In addition give me your shamba as collateral." This way, you give money to someone with slim ability to repay and charge high interest to further make it harder to pay. End result is default and you know who ends up with the shamba.

Beats logic. Its just systematic thievery perpetuated by govt in conjuction with banks.

There used to be a maxim, " to get a loan from from a bank, you must first prove that you dont need it". There is some truth in that. It must have emanated from responsible lending practices, which are foreign to our banks.

@kenyaneconomist, I can bet you that that sme guy who says better an expensive loan than none at all has no idea about finance and that sme is struggling and they are in denial about the lack of profitability of the venture and they are not paying their taxes and dont keep books of account. These are the guys getting 30% loans to buy a lorry ya kubeba mchanga, never mind they are office dudes with zero experience in that hussle, no time to manage it and bank still goes ahead to lend. The bank knows the venture will not succeed but at 30%, the bank will have made their money back in 12 months and the rest is pure profit for remaining 2 yrs. At 12%, that hesabu in now tilted against the bank with a real possibility of loss.

You have to look at the borrowing pool in numbers from which you draw averages.

so take that there will be 70 such borrowers. Out of them maybe 15 will default, but the margins realised from the other 55 makes the lender break even.T hose 15 make interest rates high for everyone. Banks should find a way to weed out the 15 and provide low rates to the remaining 55. Rate caps will force banks to find that way

One can never guarantee that the borrower you cited will definitely fail in his venture. The only issue here is that the risk is higher.

Its a pity that you suggest that he should be denied credit! If he gets the money and intensely grows peanuts somewhere in Bungoma or green-grams in Makuueni, bananas in Meru, Minji in Muranga etc.