Kenyans left at the mercy of banks as MPs fail to stop repeal on rate cap
Kenyans were on Tuesday left at the mercy of commercial banks after the National Assembly (NA) failed to stop repeal on interest rate cap.
In a heated dramatic session, chaired by NA speaker Justin Muturi, the MPs available to thwart the president’s proposal on the rate cap were 161 against the required threshold of 233 members.
Consequently, President Uhuru Kenyatta’s memo recommending the repeal on rate cap automatically sailed through.
The President’s reservations will be incorporated in the Finance Bill, 2019, to be taken to him for assent before the end of this week.
Earlier, MPs voted for President Kenyatta’s memo to be amended so that those who are already servicing old loans under the repealed regime would not be affected.
Last week, the Finance and National Planning Committee, while considering the president’s reservations, threw in the towel over the MPs’ determination to maintain the rate caps.
The amendment sailed through by a simple majority after Speaker Justine Muturi said it fully accommodated the president’s wishes.
What this means is that commercial banks will enjoy the liberty to vary the terms on loans taken during the period interest caps were in force.
It also means that there will be an increase in the repayable interest on loans, which is likely to lead to an increase in non-performing loans, as well as crowding out of investments and, consequently, reduced economic growth.
According to data from the Kenya Bankers Association (KBA), banks now carry a weighted base of Ksh.4.6 trillion and Ksh.3.4 trillion in loans and customer deposits respectively as of May 2019.