President Uhuru’s recommendations to remove the interest rate cap law have sailed through. The National Assembly adopted the recommendations after MPs failed to hit the quorum necessary to overturn the proposals.
In today’s session, only 161 members of parliament were present against the minimum of 233 members needed for a vote. As a result, the proposals passed through without a vote.
The removal of the rate cap regulation will see banks offering loans at market-determined interest rates as opposed to the capped interest rates that have been in place since September 2016.
Economists have welcomed the move claiming that it will allow credit to flow to the private sector which has been starved of funds due to the interest rate limit. Banks will now be able to lend to perceived high-risk borrowers such as SMEs and households.
Additionally, the banking sector is expected to benefit from the removal of the rate cap by charging higher interest rates than they did during the rate cap period. As a result, banking shares have posted an increase in their prices ever since parliamentarians expressed their support for the amendment. Existing loans will not be affected by the change in law.