Blow To Banks as MPs Vote to Retain the Interest Cap Law

By Soko Directory Team / August 31, 2018

Kenya’s Members of Parliament have voted to retain the interest capping law in a move that has dealt a blow to banks and the National Treasury.

The Treasury has been pushing for the amendment or the scrapping of the law which it said was unsustainable and that it was hurting the banking sector as well as the general economy.

The International Monetary Fund (IMF) has also called for the scrapping of the law saying that it was not healthy for a country that is already choking in debts.

The interest rate cap was introduced in September 2016 and was aimed at helping Kenyans and Small Medium Enterprises to have access to affordable loans from commercial banks.

The rate came into force at the time commercial banks had increased interest rates on loans to up to 28 percent, making it for thousands of Kenyans to access loans.

Despite the fact that the law was meant to help Kenyans access loans, banks retaliated by refraining from lending to ‘high risk’ customers especially the SMEs.

The SMEs have complained that ever since the law was passed, banks refused to lend to them and this was witnessed when the lending by commercial banks to the private sector dropped from 9.3 percent in 2016 to 2.4 percent in 2017.

Members of Parliament noted that the banks through the Central Bank of Kenya were ‘blackmailing’ Kenyans to make it look like the law was not working.

President Uhuru Kenyatta, who signed the cap into law said that it was unsustainable and called for its review but MPs turned down the request.

It was during the same session that MPs voted to suspend the implementation of the 16 percent Value Added Tax (VAT) on fuel that would have seen a liter of petrol retailing at a record high of more than 130 shillings. The VAT has now been moved to 1st of September 2020.

Can we now put this matter to rest and move on?

Or will the Banking Mafia in Kenia, re-group and go back to the drawing board to "Revisit".

What would be the best strategy to "fix" these Honorable Mpigs in this matter?



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[quote=Ebenyo]the mps have done this because of their numerous loans in all lending institutions.a very selfish decision.They dont care about the masses who elect them.[/quote]

That is the challenge.

What is the solution?

How will removal of the rate cap assist the masses?

"Masses" don't be fooled that when banks will be allowed to lend at 20%-30% interest rate, they will be trooping at your door steps to give you unsecured loans. Forget it wont happen. Banks are blackmailing the Govt.