The National Treasury is completing a draft proposing the amendment or abolishment of the interest rates law that will be submitted to parliament.
Treasury Cabinet Secretary Henry Rotich said the proposal contains the different barriers that prevent banks from increasing interest rates above the 14 percent mark. Rotich said the proposal will be submitted to parliament before June.
This news came before the Central bank of Kenya reduced the interest cap rate by 0.5 percent to 9.5 percent on 19 March 2018.
The banking amendment law has impacted business in the financial sectors where the industry loan book growth slowed to 3.7 percent in 1H17. In the same period, interest income decreased by 13 percent as the cost of funds dropped by 14 percent as “lenders shied away from the private sector.
CS Henry Rotich said the interest rate cap law has negatively affected the growth of the sector hence the need to amend or abolish the law. He added that the proposed amendments will factor in consumer protection against exploitation by lenders.
The amendment of the banking law was also supported by the International Monetary Fund (IMF) which was one of the conditions given for extending the Stand-By Arrangement (SBA) by 6 months.
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