The Acting Treasury Secretary Ukur Yatani has affirmed that the interest rate caps will be scrapped as the lawmakers will be unable to raise enough support in parliament to oppose President Uhuru Kenyatta.
The President last week refused to assent to proposals in the Finance Bill 2019 until the interest rate cap law is scrapped and the bill was sent to parliament for amendment.
“We are now removing our interest caps, so that we can free up resources, lending to the private sector, which has actually been constrained.” CS Ukur Yatani was quoted by Bloomberg.
In 2016 the President approved the Banking Act that limited the amount the lenders can charge on loans to 4% points above the Central Bank Rate. This was to improve lending terms for consumers but instead, it made lending institutions more selective in who they provide money. This led to consumers borrowing from unregulated micro-lenders at higher rates.
A Nairobi Court had annulled the law earlier in March but it suspended the enforcement of the law for another year so as to allow legislation to decide until a parliamentarian proposed changes that clarify the extent to which the banks can price their loans.
Related;
Tier 3 Banks Bear the Biggest Brunt of the Interest Rates Cap Regime -SIB
