Days after MPs approved President Uhuru Kenyatta’s proposal
to repeal interest rate cap on loans, Kenya bankers association has welcomed
the move.
President Uhuru Kenyatta signed into law the Finance Bill
2019 which gave the nod for free setting of interest rates by commercial banks,
after the November 5 session that saw MPs leave Kenyans at the mercy of banks,
with only 161 members attending the session.
Kenya Bankers Association chairperson Joshua Oigara has
assured the country that though interest capping has been scrapped, the law
will rule over lending.
“We recognize the concerns raised by MPs regarding how the
industry will respond to the removal of the interest rate controls and would
like to assure the banking public that banks will abide by the law,” read a
statement from Mr. Oigara.
But fear is still high among borrowers, especially the Micro
Small and Medium Enterprises (MSMEs), who will be at the mercy of banks which
will have the liberty to price their loans.
Reports show that, before the interest rate cap law was
enacted, interest rates by banks increased to a range of 24-30 per cent, which
is the highest lending rate.
The President, Commercial Bank of Kenya and Kenya bankers
association have welcomed the repeal saying it will ignite the economy that was
about to stagnate.
However, the interest cap repeal comes days after a big
merger at the Nairobi Securities Exchange happened, involving the Commercial Bank
of Africa and NIC Bank, which are owned by the Kenyatta family.
Nation writes that President Uhuru Kenyatta’s assumption of
power in 2013 further served to oil the Kenyatta business juggernaut with most
of the family ventures shifting into expansion mode.
With the interest rate cap repeal and NIC-CBA merger, the
Kenyatta family business grows to a large extend, increasing shares at NSE and
investing into more ventures.
The family holds a 24.92 stake at Commercial Bank of Africa
(CBA), of which, which holds about 13.2 per cent stake in the NIC business.
The merger is the third-largest in the country’s banking
sector, with assets of Sh444.3 billion, and President Kenyatta, his brother
Muhoho and former First Lady Mama Ngina Kenyatta will together directly hold
stakes worth Sh8.5 billion from the bank.
Discussion about this post