Kenyan Lenders Push Central Bank to Clarify Rate-Cap Law

Kenyan lenders are seeking clarification from the central bank about which base rate they should use when determining loan costs, and may be forced to lower rates further if they’re advised the one they’re already using is incorrect, the industry lobby group said.

Banks last week began cutting the cost of loans to a maximum of 14.5 percent after President Uhuru Kenyatta on Aug. 24 signed a law setting commercial lending rates at no more than four percentage points above the central bank base rate. Two weeks later, lenders are still unclear whether that refers to the Central Bank Rate, currently at 10.5 percent, or the Kenya Banks’ Reference Rate, which is at 8.9 percent, said Lamin Manjang, chairman of Kenya Bankers Association.

Some of the listed companies expected to close their books for the dividend this month and hence likely to witness increased activity include Bamburi, Nation Media Group, BOC Kenya and Centum Investments Ltd.

Equities

Market activity gained momentum after starting on a lower note yesterday as shown by the market indicators above.

The NSE 20 Share index was down by 1.97 points to close the day at 3169.31 points from 3171.28 points previously, while the NASI added 0.77 points to end the day at 130.42 points. The NSE 25 Share index advanced marginally to 3420.86 points from 3420.52 points before. Shareholders wealth increased to KES 1877.959 billion from KES 1866.871 earlier, whilst equity turnover improved by 29.12% to KES 0.78 billion from KES 0.61 billion formerly, despite a 34.06 % drop in the number of shares traded.

Currencies

The Kenyan shilling weakened albeit slightly against the US dollar as it exchanged at a mean of KES 101.27 down from an average of KES 101.24 yesterday, owing to demand pressure from importers but was however held by inflows from remittances and non-governmental organizations.

The Sterling and the Euro gained further today against the shilling following the incredibly strong Purchasing Managers Index (PMI) Data from the services sector released yesterday. The figure for August arrived at 52.9 against expectation of just 49.9 highlighting expansion in the sector.

The July PMI figures immediately following the Brexit vote were extremely poor and the jump higher yesterday represent the biggest gain in 25 years which resulted in the substantial gains for the pound.