Let Us Get Out of the Interest Rate and Move On – Henry Rotich

By Soko Directory Team / Published June 19, 2018 | 7:02 am





Financial industry stakeholders on Monday held a forum to discuss the impact of the Banking (Amendment) Act, 2016 amid concerns that the law has slowed down the pace of economic growth.

Since the introduction of the legislation, the number of loan accounts has reduced by more than 1.3 million accounts, while the rate of growth of private sector credit has reached an all-time low with banks opting to invest in Government securities.

The credit markets have suffered further volatility as the level of Non-Performing Loans (NPLs) increased to more than 12 percent (or 292 billion shillings) due to the challenging business environment that was witnessed in 2017 and early this year.

Organized by the Kenya Bankers Association in collaboration with Fanaka TV and the Institute of Economic Affairs, the Interest Rate Debate brought together the private sector, economists, Members of Parliament, consumer rights advocates and the public to discuss ways of moderating the cost of loans in a sustainable way.

“The interest capping law is as a result of massive policy failure,” Said Mr. Moses Kuria, Member of Parliament for Gatundu South.

Mr. Kuria was among the legislators who were against the passing and the implementation of the interest capping law.

According to the Central Bank of Kenya, lending to SMEs has dropped by more than 13 billion shillings due to banks’ heightened risk sensitivity following the enactment of the rate caps in September 2016, as well as provisioning requirements occasioned by the new International Financial Reporting Standards (IFRS) 9 on Financial Instruments.

“Our interest capping law is dragonian. It has both the ceiling and the floor. There is no breathing space. Interest caps in other countries have no ceiling or floor,” said the Treasury Cabinet Secretary Henry Rotich.

Most of those who took part in the debate were of the view that there was the need to relook into the whole interest rate issue and if possible, do away with it all together.

“It is KBA’s view, as well as that of several other industry analysts, the decrease in private sector lending will have a material, long-term impact on the economy,” added Olaka of Kenya Banker’s Association. “All this points to the fact that we must replace this law with measures that meet the needs of all stakeholders. Before the law came into place, the average lending rate was approximately 17 percent and it was even 15 percent a few years ago. We, therefore, believe that rates can come down in a sustainable way that does not limit access to much-needed capital for the core drivers of our growth and employment,” he added.

In the Financial Year 2018/2019 Budget Statement, Cabinet Secretary of National Treasury and Planning Mr. Henry Rotich stated that the Government would put in place a package of reforms aimed at optimizing lending to the private sector while at the same time encouraging innovation in the financial services sector.

In place of the interest rate caps, Mr. Rotich noted several measures including the establishment of a National Credit Guarantee Scheme for Micro, Small and Medium Enterprises (MSMEs), and the introduction of a Financial Markets Conduct Bill, 2018 that comprehensively addresses consumer protection and unregulated lending in the financial sector.

“We should get out of the interest rate cap and move on,” said the Treasury CS.




About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

View other posts by Soko Directory Team


More Articles From This Author








Trending Stories










Other Related Articles










SOKO DIRECTORY & FINANCIAL GUIDE



ARCHIVES

2024
  • January 2024 (238)
  • February 2024 (227)
  • March 2024 (190)
  • April 2024 (133)
  • May 2024 (157)
  • June 2024 (65)
  • 2023
  • January 2023 (182)
  • February 2023 (203)
  • March 2023 (322)
  • April 2023 (298)
  • May 2023 (268)
  • June 2023 (214)
  • July 2023 (212)
  • August 2023 (257)
  • September 2023 (237)
  • October 2023 (266)
  • November 2023 (286)
  • December 2023 (177)
  • 2022
  • January 2022 (293)
  • February 2022 (329)
  • March 2022 (358)
  • April 2022 (292)
  • May 2022 (271)
  • June 2022 (232)
  • July 2022 (278)
  • August 2022 (253)
  • September 2022 (246)
  • October 2022 (196)
  • November 2022 (232)
  • December 2022 (167)
  • 2021
  • January 2021 (182)
  • February 2021 (227)
  • March 2021 (325)
  • April 2021 (259)
  • May 2021 (285)
  • June 2021 (272)
  • July 2021 (277)
  • August 2021 (232)
  • September 2021 (271)
  • October 2021 (305)
  • November 2021 (364)
  • December 2021 (249)
  • 2020
  • January 2020 (272)
  • February 2020 (310)
  • March 2020 (390)
  • April 2020 (321)
  • May 2020 (335)
  • June 2020 (327)
  • July 2020 (333)
  • August 2020 (276)
  • September 2020 (214)
  • October 2020 (233)
  • November 2020 (242)
  • December 2020 (187)
  • 2019
  • January 2019 (251)
  • February 2019 (215)
  • March 2019 (283)
  • April 2019 (254)
  • May 2019 (269)
  • June 2019 (249)
  • July 2019 (335)
  • August 2019 (293)
  • September 2019 (306)
  • October 2019 (313)
  • November 2019 (362)
  • December 2019 (318)
  • 2018
  • January 2018 (291)
  • February 2018 (213)
  • March 2018 (275)
  • April 2018 (223)
  • May 2018 (235)
  • June 2018 (176)
  • July 2018 (256)
  • August 2018 (247)
  • September 2018 (255)
  • October 2018 (282)
  • November 2018 (282)
  • December 2018 (184)
  • 2017
  • January 2017 (183)
  • February 2017 (194)
  • March 2017 (207)
  • April 2017 (104)
  • May 2017 (169)
  • June 2017 (205)
  • July 2017 (189)
  • August 2017 (195)
  • September 2017 (186)
  • October 2017 (235)
  • November 2017 (253)
  • December 2017 (266)
  • 2016
  • January 2016 (164)
  • February 2016 (165)
  • March 2016 (189)
  • April 2016 (143)
  • May 2016 (245)
  • June 2016 (182)
  • July 2016 (271)
  • August 2016 (247)
  • September 2016 (233)
  • October 2016 (191)
  • November 2016 (243)
  • December 2016 (153)
  • 2015
  • January 2015 (1)
  • February 2015 (4)
  • March 2015 (164)
  • April 2015 (107)
  • May 2015 (116)
  • June 2015 (119)
  • July 2015 (145)
  • August 2015 (157)
  • September 2015 (186)
  • October 2015 (169)
  • November 2015 (173)
  • December 2015 (205)
  • 2014
  • March 2014 (2)
  • 2013
  • March 2013 (10)
  • June 2013 (1)
  • 2012
  • March 2012 (7)
  • April 2012 (15)
  • May 2012 (1)
  • July 2012 (1)
  • August 2012 (4)
  • October 2012 (2)
  • November 2012 (2)
  • December 2012 (1)
  • 2011
    2010
    2009
    2008
    2007
    2006
    2005
    2004
    2003
    2002
    2001
    2000
    1999
    1998
    1997
    1996
    1995
    1994
    1993
    1992
    1991
    1990
    1989
    1988
    1987
    1986
    1985
    1984
    1983
    1982
    1981
    1980
    1979
    1978
    1977
    1976
    1975
    1974
    1973
    1972
    1971
    1970
    1969
    1968
    1967
    1966
    1965
    1964
    1963
    1962
    1961
    1960
    1959
    1958
    1957
    1956
    1955
    1954
    1953
    1952
    1951
    1950