Uhuru Rejects Finance Bill, Wants MPs to End Cheap Loans for Kenyans
President Kenyatta declined to assent to the Finance Bill 2019 and asked MPs to scrap a cap on commercial lending that was imposed in 2016.
Consequently, Uhuru has sent the Bill back to the National Assembly after agreeing with the Treasury and Central Bank of Kenya (CBK) that the interest rate cap is hurting the economy.
The two bodies argue that the law has negatively affected private-sector loan growth as lenders have avoided giving loans to customers deemed as risky, including SMEs.
“The President has not assented to the Bill and has returned it to Parliament for review. The issue is the repeal of interest capping law,” National Assembly Majority Leader Aden Duale told Business Daily.
“The memorandum will be communicated to the House tomorrow afternoon (Thursday) by the Speaker.”
Multinational agencies such as the International Monetary Fund (IMF) have also been pressuring the government to scrap or modify the interest restriction law.
If MPs heed to Kenyatta’s advice and repeal the law, banks will have the freedom to price their loans depending on risk assessment. This means borrowers will be left at the mercy of commercial lenders as far as interest on loans is concerned.
Before the introduction of the capping law in 2016, banks exposed borrowers to high lending rates of up to 25 percent.
The cap put lending rates at four percentage points above Central Bank of Kenya’s benchmark, which currently stands at nine percent, putting the maximum borrowing rate at 13 percent.
Comments
It's advantageous to those…
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It's advantageous to those who own banks. Conflict of interest here.
Uhuru family have a bank.
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In reply to It's advantageous to those… by King Cool (not verified)
Uhuru family have a bank.
Not sure when 5 years will…
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Not sure when 5 years will be over. We might as well have no government. Government for old retired people, corruption, Mara reparian lands.. kibaki needed to extend his term
I agree with the president,…
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I agree with the president, Treasury, CBK, and IMF. In this world we're living in : Kenya needs "a free market system in which the prices for goods and services are self-regulated by the open market and by consumers." For in a free market, "the laws and forces of supply and demand are free from any intervention by a government or other authority and from all forms of economic privilege, monopolies and artificial scarcities." So it was the right thing to dissent Bill.
@guest 1 there is no such a…
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In reply to I agree with the president,… by GUEST1 (not verified)
@guest 1 there is no such a thing as free market in today's capitalism, all we have is manipulated market. Why do feds spend billions buying stocks whenever the American stocks start crumbling, I thought free market was about supply and demand.
Wall Street is a Man-Eat-Man…
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In reply to @guest 1 there is no such a… by Anonymous UI (not verified)
Wall Street is a Man-Eat-Man street. Don't bank on it. But remember: Free market is about Forces of SUPPLY and DEMAND.
My deposit earns 0 interest,…
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In reply to Wall Street is a Man-Eat-Man… by GUEST1 (not verified)
My deposit earns 0 interest, while the bank is lending same at 25 percent. This isn't supply and demand, it's the big fish eating the small ones.
Our leaders have a huge…
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Our leaders have a huge appetite for foreign loans due to corruption. In return, the foreign lenders are asking for free access to our resources both human and otherwise. Kenyans will soon be charged usury interest rates and be paid any kind of pay on employment.
The government cares more about obtaining more loans than stabilizing Kenyans and their families. Kenyans need to blaze themselves for what is coming. Stop borrowing from banks, borrow from each other and from family members until those laws go back to where they are today. Those commercial banks need to lend to themselves.
An economy that is based on…
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An economy that is based on expensive loans cannot grow. It is hard to open new business or expand existing ones.
It is hard to create new jobs.Cheap mortgage loans create a demand for new homes and existing home market.Expensive loans will only result in immense profits for finance companies and banks feeding off the citizens.That is why the government needs to put a cap.Why is this so difficult for our African leaders to understand?
Boss the cap is in place…
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In reply to An economy that is based on… by George Ngugi (not verified)
Boss the cap is in place. Unfortunately, treasury bonds pay up to 12% and they are guaranteed. SME loans cost up to 14% with plenty of risk...banks opted to loan to the government. The cap has caused a huge loan access problem in Kenya. If the cap is removed, there will be competition to provide loans again. Maybe a huge opportunity for companies to provide cheaper loans.
25 percent interest! That is…
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25 percent interest! That is insane. The cap should be maintained. Businesses cannot borrow money at those rates. Mortgages will be too expensive. How do Kenyan financial institutions justify such high rates. In developed economies, financial institutions with such high rates would simply collapse. Mr president, do not bow to the IMF. Keep the cap in place. Parliament should veto the president and keep the cap intact!
Someone correct me if I am…
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Someone correct me if I am wrong, but don't cheap loans stimulate the economy? Uhuru is just propagating the normal Usury of Kenyan banks.
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