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Law Capping interest rates
Rank: Veteran Joined: 11/13/2015 Posts: 1,654
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tom_boy wrote:FRM2011 wrote:snifadog wrote:FRM2011 wrote:newfarer wrote:tom_boy wrote:Interest rate caps should stay. So far I have not seen any tangible effect of the caps. Banks are still making super profits. Credit worthy people are still getting loans. Shida iko wapi? me too .if you are creditwothy you should not have problem with the cap..I have seen banks beg me to take loan with them. shida iko wapi? Allow me to give you a situation on a specific industry. I know a thing or two about long-distance trucking. 5 years ago, banks were falling over themselves to finance customers in this industry. The trailer part of these trucks are locally built. At some point around 2013, Bhachu & Randon who are the market leaders had a 4-months waiting period for orders. Smaller players expanded to fill in the gap. Load trailers, Ocean trailers, Hans trailers, Trans-trailers, TTL, Supa trailers e.t.c. These were employing 1,000s of artisans to fabricate the bodies. Since the rate capping, only Stanbic and NIC are willing to finance trucks and they cherry-pick the very best customers. Equity, KCB, coop, Barclays and Stanchart don't even look at asset finance applications after the rate cap. As financing dried, these body-builders retrenched massively. Today, you can walk into Bhachu and they start working on your order tomorrow. Business is that bad. No other president would have signed this bill. Even Moi, daft and crooked as he was, refused to sign. Only Uhuru could. If this trucking business was so good and flourishing, why didn't the banks continue to finance it even after the caps? something doesn't add up. Perhaps it was all along a poor business being propped up by availability of credit The banks stopped financing SMEs in general because our crooked and greedy government is borrowing from the same banks at 13%. Why would a bank bother employing credit analysts to process customer applications while a corrupt govt wants the same money. 100% risk free. I have never found anyone to explain to me, in simple language that my simple mind can understand, how on earth does someone who was servicing loans on time at 20% interest suddenly become a poor credit risk at 13% interest. Even senior bankers cannot explain this phenomenon. 20% interest rates also indicates a loose monetary policy there is a lot money in circulation so prices of assets like land or shares are going up so it will be easy to repay the loan. At this time bank is thinking on return on capital. If money is tight then 13% is for prime borrowers, the bank has to think of return of capital. The borrower at 20% is risky compared to the prime borrower so you lend to the prime borrower first. If everyone is at 13% you only concentrate on the prime borrower it is less expensive to collect on his debt.
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Rank: Member Joined: 2/20/2007 Posts: 767
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I begged for a simple answer. This one can only be understood by those already brainwashed by economic theorems that are theoretical. For example, do high rates charged on mobile lending indicate loose monetary policy or more tied to risk involved. If the latter, then proceed to answer how my risk profile changes just because I have been offered a cheaper loan 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: Veteran Joined: 11/13/2015 Posts: 1,654
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tom_boy wrote:I begged for a simple answer. This one can only be understood by those already brainwashed by economic theorems that are theoretical. For example, do high rates charged on mobile lending indicate loose monetary policy or more tied to risk involved. If the latter, then proceed to answer how my risk profile changes just because I have been offered a cheaper loan Mobile lending is done on facility fee not interest rate. You are paying for the convenience much like a credit card. Ni kama kula chapati hilton hotel. By the way money, risk, price is very theoretical. Let me try explain this further. Values are in the minds of men and, like the minds of men, they are never constant. There is no standard by which ever-fluctuating values can be measured. There are no constant units, and never can be any, with which to measure values. The same economic good has different values for different people, and different market values at different times. Your risk profile is also never constant. Most importantly the value of money is not a legal proposition. This is what the high court judges missed.
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Rank: Elder Joined: 7/21/2010 Posts: 6,194 Location: nairobi
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Kcb & equity volume welcomes the news "Don't let the fear of losing be greater than the excitement of winning."
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Rank: Member Joined: 6/26/2008 Posts: 399
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[quote=mlennyma]Kcb & equity volume welcomes the news[  CFC too. Just clocked 100. not sure if I should add more now or wait till euphoria ends.....
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Rank: Elder Joined: 2/26/2012 Posts: 15,980
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wukan wrote:tom_boy wrote:I begged for a simple answer. This one can only be understood by those already brainwashed by economic theorems that are theoretical. For example, do high rates charged on mobile lending indicate loose monetary policy or more tied to risk involved. If the latter, then proceed to answer how my risk profile changes just because I have been offered a cheaper loan Mobile lending is done on facility fee not interest rate. You are paying for the convenience much like a credit card. Ni kama kula chapati hilton hotel.By the way money, risk, price is very theoretical. Let me try explain this further. Values are in the minds of men and, like the minds of men, they are never constant. There is no standard by which ever-fluctuating values can be measured. There are no constant units, and never can be any, with which to measure values. The same economic good has different values for different people, and different market values at different times. Your risk profile is also never constant. Most importantly the value of money is not a legal proposition. This is what the high court judges missed. We tried to explain that to this dude sometime back but he couldn't gerrit...If you succeed am buying you chapati at Hilton "There are only two emotions in the market, hope & fear. The problem is you hope when you should fear & fear when you should hope: - Jesse Livermore
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Rank: Elder Joined: 12/7/2012 Posts: 11,935
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murchr wrote:wukan wrote:tom_boy wrote:I begged for a simple answer. This one can only be understood by those already brainwashed by economic theorems that are theoretical. For example, do high rates charged on mobile lending indicate loose monetary policy or more tied to risk involved. If the latter, then proceed to answer how my risk profile changes just because I have been offered a cheaper loan Mobile lending is done on facility fee not interest rate. You are paying for the convenience much like a credit card. Ni kama kula chapati hilton hotel.By the way money, risk, price is very theoretical. Let me try explain this further. Values are in the minds of men and, like the minds of men, they are never constant. There is no standard by which ever-fluctuating values can be measured. There are no constant units, and never can be any, with which to measure values. The same economic good has different values for different people, and different market values at different times. Your risk profile is also never constant. Most importantly the value of money is not a legal proposition. This is what the high court judges missed. We tried to explain that to this dude sometime back but he couldn't gerrit...If you succeed am buying you chapati at Hilton The other thing is that banks would rather lend to GoK at 13% without effort, than to lend to the guy they used to lend to at 20% but now they are forced to let to him at 13% with same effort previously employed. Which one would you go for, you don't need to be a genius at all to make the right choice here!!! In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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Rank: Member Joined: 12/8/2006 Posts: 104
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alma1 wrote:Let Omtata appeal if he wishes.
I am against any government caps on anything. I think you have seen my issue with farmers. But at the same time I still believe gov't should never ever be involved in pricing.
Even this issue of matatu pricing. I am totally against it.
Let the banks set their rates.
Thus far the CBK and gov't have been using the banks as their punch boys. Listen. Interest rates go up or down depending on gov't policy.
Since Kenyan gov't policy is either raira charo nefa mbe, Kibaki tosha and such nonsense we get lazy policy makers.
I really hate Kenyan banks. But I don't believe that gov't pricing has ever helped any economy. After all, who told you to seek a loan from Stanchart? Ni mamayako?
That's my view and I ain't changing it. Hi all. Long analysis warning. But looks like caps are here to stay at least for now. Thoughts? https://comparerateskeny...l-is-there-any-way-out/
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Rank: Member Joined: 1/1/2011 Posts: 396
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passiveinvestor wrote:alma1 wrote:Let Omtata appeal if he wishes.
I am against any government caps on anything. I think you have seen my issue with farmers. But at the same time I still believe gov't should never ever be involved in pricing.
Even this issue of matatu pricing. I am totally against it.
Let the banks set their rates.
Thus far the CBK and gov't have been using the banks as their punch boys. Listen. Interest rates go up or down depending on gov't policy.
Since Kenyan gov't policy is either raira charo nefa mbe, Kibaki tosha and such nonsense we get lazy policy makers.
I really hate Kenyan banks. But I don't believe that gov't pricing has ever helped any economy. After all, who told you to seek a loan from Stanchart? Ni mamayako?
That's my view and I ain't changing it. Hi all. Long analysis warning. But looks like caps are here to stay at least for now. Thoughts? https://comparerateskeny...l-is-there-any-way-out/
.....mmmmeeh
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Rank: Veteran Joined: 10/29/2008 Posts: 1,566
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tom_boy wrote:I begged for a simple answer. This one can only be understood by those already brainwashed by economic theorems that are theoretical. For example, do high rates charged on mobile lending indicate loose monetary policy or more tied to risk involved. If the latter, then proceed to answer how my risk profile changes just because I have been offered a cheaper loan At 20% interest rate, lending to 40,000 borrowers you reckon that even if (likely) 15 percent of the borrowers default at varying points of the facility tenure, in the final analysis the segment as a whole will return a profit. At 15% interest rate, the ball game plan is different. The ‘spreads’ are too thin, even a lower percentage in defaults could see you lose your money. Again policies are made on the whole, in regard to a segment. One makes a logical business decision – comparatively, lending to the common guy is generally riskier than deploying the same resources to lend to the Government or trade elsewhere. Being compelled to lend to the common guy at 14% with the attendant higher risk, while there are other less risky options with generally similar returns, they take the obvious choice. Isuni yilu yi maa me muyo - ni Mbisuu
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