By your own argument, then the law has not worked. It has merely altered lenders' behaviour. By one count, there are over 49 digital lenders. All emerging in the past 3 years and charging annualized lending rates above 150%. It may be possible to argue that lending standards were loose in the past, but lending in a market with little to no information is inherently difficult. Taking Nakumatt as an example (and only because alot of the information is in the public domain) there was no clear, independent way of assessing their financial health PRIOR to advancing lending facilities 2/3 years back. There is no reporting system for corporates that pay their suppliers late, for example. The rates cap law would not cure that specific issue. Introducing a reporting system accessible by lenders would.

...I said no clear, independent way...and I did not say that they lent anyway. Lots of banks walked away or offered loans at high, unregulated rates. I.e. they priced for uncertainty. The caps leave no room for judgment driven pricing in a market with opaque information at the best of times. That is why credit referencing bureaux are critical in any economy. There is currently no mandatory reporting for companies. This lengthens the credit assessment process significantly. Simply capping rates leads to the exact knee-jerk response obserbed in the market, which is to simply curtail lending altogether.

Pure hogwash. Fact is with high lending rates, banks did not care whom they were lending to. All one had to show is ability to pay back for at least 1 yr which would assure banks of having recovered their money. Afterwards it was pure profit. Same game they are playing with mobile loans. At some point some bank lent money to NCC. With their mismanagement, not paying salaries on time, not paying service providers, not meeting collection targets, yet credit worthy.Look how that ended.

1. In order to get your money back in the first year on, say, a 5 year loan (you would need to lend at 80% interest p.a.)
2. Any financial projections for a company beyond 1 yr are exponentially unreliable. Hence the use of 2-3 year audited financials and a 1-2yr projection.
3. Don't know about the NCC transaction, but any loans to a public sector entity are inherently risky due to sovereign risk (including parastatals, counties, councils etc).
4. A large number of SMEs rely in part on sales to govt. or large market players like Supermarkets.So any delays still have a knock on effect on the underlying loan.
A simple cap of 4% means there is no room for banks to apply their judgment in pricing loans. So your own rexommendation that banks should underwrite loans more carefully is curtailed if they cannot also price differently for riskier loans.

Banks only reduced NEW loan advances, especially to customers who were not paying or defaulting on previous loans. Banks. And as you can see from the CBK report from the MPC meeting. There has still been credit expansion in the SME segment (6%) as opposed to the more ideal 12% by CBK standards. What is not clear is whether the 6% incremental is new loans or incremental loans to existing clients.