wukan wrote:tom_boy wrote:quicksand wrote:Ericsson wrote:Interest rates cap was for government to borrow money cheaply in the domestic market
There is no indicator that had the interest rates remained unregulated, the government would have borrowed
less.
With no ceiling, rates would have started climbing to the mid-twenties because of irresponsible government borrowing, just like the Cheserem days when TBills hit an eye-watering return rate of 31%. The government was a simple money minting machine for banks back then.
The net effect would have been businesses getting starved of credit anyway.
If the government does not stay the course and reverses the law, it will all have been pointless. Now, Rotich needs to put his thinking cap on and finds another source of money to plug holes and reduce reliability on expensive domestic credit, we need a fiscal disciplinarian, wield a big club and smash heads if a whiff of waste is detected at ministries,..counties...and the good doctor at Central starts squeezing bankster balls. The Trifecta.
Now is not the time to relent, it is time to disembowel and exsanguinate large scale usury and predatory practices in our financial system once and for all, even if it causes us some temporary pain.
We survived 24 years of Moi for God's sake.
My sentiments exactly.
And if M-akiba bond - Pesa link channels are exploited well by Gok, banks will start wailing all over again. Then they will dry their tears and realise they should just get to work and lend responsibly, utilise a working CRB etc etc.
River road economics at its best
There is nothing new under the sun. These usury laws were used in US in the 1970's and we ended up with prime(whites) and sub-prime borrowers(blacks and other minorities). Banks still made money and super-profits the people who suffered are the sub-prime borrowers most ended up in urban ghettos and minimum wage employment.
If you think 3% credit growth will guarantee your kids employment in this economy in the next 5 years then it's fine. Paraphrasing Kibaki, tuendelee na style hiyo hiyo
Let me advance my River road economic theory a bit further.
Other than our ' western economists' spelling doom and gloom for banks and the economy due to rate caps, I fail to see how rate caps can be bad for the the middle class, if indeed middle class drive this economy.
Lack of access to loans by middle class means less purchasing of imported, useless luxury, consumption items. How can this be bad for the economy?
It means less buying of useless pieces of land to hold for x years and sell to the next sucker that comes along. Means less land price inflation. How can this be bad for Kenya?
It means less building of mansions in remote places on loan and spending in ordinate amounts of fuel and time getting to and from work while struggling to pay off your loan. How is this bad on a macro economic scale?
It means better planned and executed businesses with proper records and a growth plan , eager to build a credit history and maintain a good credit rating so as to attract cheap bank credit.
It means no more bank funded side hussles like taxi business on loan from an unsecured salary loan. Businesses that inevitably fail or remain mediocre at best despite rosy initial projection.
Any seasoned entreprenuer will tell you that you dont need loads of cash to succeed. Infact, too much cash at the beginning will be your down fall.
My river road economic theory is based on above observations. In my view, a bit of starvation and dieting from credit, useless credit that does not help a business grow, is a good thing.
I am still waiting for the example of a 35% return business that woul qualify for a well regulated bank loan.
They must find it difficult....... those who have taken authority as the truth, rather than truth as the authority. -G. Massey.