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Law Capping interest rates
Rank: Member Joined: 2/20/2007 Posts: 767
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winston wrote:For the pro-rate brigade, please help us understand what will force the banks to open their tight fists and lend to wanjiku under the current scenario?
1) Dwindling profits?
2) Public pressure?
3) Competition?
4) Government force (legislation)?
As long as risk-free rates on government securities are more attractive than lending at a flat rate to the borrowing public (on a risk adjusted basis)...we shall continue to wait for the banks to relent...and wait in vain. When they realise that they can actually make more money by lending carefully to credit worthy individuals and companies. When it hits them that CBK is not and will not accept those high bids they have been putting in for bills and bonds. When CBK decides to accept even lower bids of 9.5%, then 9%, and eventually go to 8% for bills and bonds. 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: Member Joined: 4/14/2010 Posts: 806 Location: Nairobi
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tom_boy wrote:winston wrote:For the pro-rate brigade, please help us understand what will force the banks to open their tight fists and lend to wanjiku under the current scenario?
1) Dwindling profits?
2) Public pressure?
3) Competition?
4) Government force (legislation)?
As long as risk-free rates on government securities are more attractive than lending at a flat rate to the borrowing public (on a risk adjusted basis)...we shall continue to wait for the banks to relent...and wait in vain. When they realise that they can actually make more money by lending carefully to credit worthy individuals and companies. When it hits them that CBK is not and will not accept those high bids they have been putting in for bills and bonds. When CBK decides to accept even lower bids of 9.5%, then 9%, and eventually go to 8% for bills and bonds. so the same gova which introduced caps is hindering those same caps from working?
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Rank: Member Joined: 1/27/2012 Posts: 851 Location: Nairobi
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Obi 1 Kanobi wrote:Ngalaka wrote:Ngalaka wrote:mobutu123 wrote:Banks have to be innovative.
if i may ask these guys supporting removal of
caps.give 3 reasons how caps removal will make my business and the economy grow. With vibrancy in the economy your business will benefit. SMEs who are hard up would get a reprieve and spur the economy. Whatever you sell, they will begin (new customers) buying or increase (old customers) their volume of purchase. By the way though I support the removal of rate caps as we know them to date, I do not deny that there is need to engage the banking/finance sector players in a constructive, and consultative way, that does not involve bludgeoning them into submission as seems to be the case currently. Handled meaningfully we should be able to roll out an interest rate regime that is not debilitating to the borrower, but at the same time good for the lender. While at it we must take note that interest rate for this economy is determined by factors that are unique to our economy and all that pertains to it, including CORRUPTION, which I submit is a key factor here. As such the whole issue represents one big irony of the rate cap law, as imposed by those who ought to check corruption levels – then everything else follows! There is nothing unique to our economy. Economics has and will always have 4 factors of production the world over. @Obi. Are you sure about that? Example; In Matata business, that 50bob to cops, under which of the 'traditional 4 factors' does that fall under?
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Rank: Member Joined: 1/27/2012 Posts: 851 Location: Nairobi
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Mukiri wrote:Loans should be at 1 or 2%! Anything above 5% is corruption. If default is their argument, then shouldn't banks reduce interest to make repayment feasible? Ours is a man-eat-man country, and if nobody looks out for ordinary mwanainchi, the bullies will have a feild day.
And while we are at it, calling rates should be cents.. Whats with all these super billions reported in profits, with a Wanjiku insulted as 3rd World. Ali baba and Crypto, come restore some sanity 'Sirkal'-saidia-mentality.
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Rank: Member Joined: 1/27/2012 Posts: 851 Location: Nairobi
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tom_boy wrote:mkeiy wrote:tom_boy wrote:
Let us debate. The problem is many of the anti rate cap brigade are theory people.
Which bank has EVER lent money to a startup that has no security and no big connections before they are able to demonstrate clear positive cash flow. Tell me just one instance in Kenya even at those 25% interest.
Established business is not = to big business. An established business is one that is selling a good or service, customers are buying and actually paying for the items, there is a system to how the business runs and this system is expected to continue running in the forseeable future. Fly by night tenderpreneurship is not an established business. Mama mboga or mama Oliech is an established business. I hope guys can get this. Stop with many theories. Look at what is practical
@tom-boy. Practical is what I do. I am in business,is that theory too? I can count from my left hand fingers to my right hand fingers,small businesses,worth 100k or so in the year 2010,are now businesses worth millions. Thanks to bank loans. Those kind of loans, are not available now Real people, real businesses. In 6 years. The ones at that stage right now,starting at 100k, ceteris paribus, cannot get even a single penny from the same banks. In 2023,after 6 years from now, how much will their businesses be worth?
Mambo ya theories na tenderpreneurs toa kwa huu mjadala. In that case, if you have a real business going, it means uko na cash flow and some profit. Hang in there my brother, the banks will soon come to their senses and come looking for you. @tom-boy. Would you just answer the question in dark blue please!
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Rank: Veteran Joined: 10/29/2008 Posts: 1,566
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mkeiy wrote:Obi 1 Kanobi wrote:Ngalaka wrote:Ngalaka wrote:mobutu123 wrote:Banks have to be innovative.
if i may ask these guys supporting removal of
caps.give 3 reasons how caps removal will make my business and the economy grow. With vibrancy in the economy your business will benefit. SMEs who are hard up would get a reprieve and spur the economy. Whatever you sell, they will begin (new customers) buying or increase (old customers) their volume of purchase. By the way though I support the removal of rate caps as we know them to date, I do not deny that there is need to engage the banking/finance sector players in a constructive, and consultative way, that does not involve bludgeoning them into submission as seems to be the case currently. Handled meaningfully we should be able to roll out an interest rate regime that is not debilitating to the borrower, but at the same time good for the lender. While at it we must take note that interest rate for this economy is determined by factors that are unique to our economy and all that pertains to it, including CORRUPTION, which I submit is a key factor here. As such the whole issue represents one big irony of the rate cap law, as imposed by those who ought to check corruption levels – then everything else follows! There is nothing unique to our economy. Economics has and will always have 4 factors of production the world over. @Obi. Are you sure about that? Example; In Matata business, that 50bob to cops, under which of the 'traditional 4 factors' does that fall under? Sometimes people here argue for the sake of arguing. Ignoring reality which is in open sight! Isuni yilu yi maa me muyo - ni Mbisuu
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Rank: Veteran Joined: 10/29/2008 Posts: 1,566
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Until the other day, Barclays in UK and the one here were under one directorship. However their interest regimes were as different as it gets as a function of the different environments in which they operate. Isuni yilu yi maa me muyo - ni Mbisuu
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Rank: Elder Joined: 7/23/2008 Posts: 3,017
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mkeiy wrote:Obi 1 Kanobi wrote:Ngalaka wrote:Ngalaka wrote:mobutu123 wrote:Banks have to be innovative.
if i may ask these guys supporting removal of
caps.give 3 reasons how caps removal will make my business and the economy grow. With vibrancy in the economy your business will benefit. SMEs who are hard up would get a reprieve and spur the economy. Whatever you sell, they will begin (new customers) buying or increase (old customers) their volume of purchase. By the way though I support the removal of rate caps as we know them to date, I do not deny that there is need to engage the banking/finance sector players in a constructive, and consultative way, that does not involve bludgeoning them into submission as seems to be the case currently. Handled meaningfully we should be able to roll out an interest rate regime that is not debilitating to the borrower, but at the same time good for the lender. While at it we must take note that interest rate for this economy is determined by factors that are unique to our economy and all that pertains to it, including CORRUPTION, which I submit is a key factor here. As such the whole issue represents one big irony of the rate cap law, as imposed by those who ought to check corruption levels – then everything else follows! There is nothing unique to our economy. Economics has and will always have 4 factors of production the world over. @Obi. Are you sure about that? Example; In Matata business, that 50bob to cops, under which of the 'traditional 4 factors' does that fall under? Which factor of production collects rent, that's the factor that bribe collection belongs to(the 4 factors are meant to display economic theory in its simplest form) . The point that I am trying to make is that we as a country are not unique in any way. Our greatest challenge as a country is leadership/management skills (which happens to be the most important) and we try to explain it away as uniqueness or special circumstances etc. managerial skills "The purpose of bureaucracy is to compensate for incompetence and lack of discipline." James Collins
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Rank: Veteran Joined: 10/29/2008 Posts: 1,566
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As an investor, one consider all the factors contributing to cost of product/sales/providing service including risk then prices his product/service. Isuni yilu yi maa me muyo - ni Mbisuu
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Rank: Elder Joined: 7/23/2008 Posts: 3,017
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http://www.businessdaily...39986-ibk77b/index.html
How did this 11 banks arrive at different risk prices for their KQ loans. Doesn't look like any analysis was carried out. Seems most banks just lend to this supposed large corporates at whichever rates the corporates want. "The purpose of bureaucracy is to compensate for incompetence and lack of discipline." James Collins
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