The Kenyan Government through the national treasury has formed a task force to analyze the impact of interest rate cap with a view of reviewing the law in the next parliament.
Dr Geoffrey Mwau, director general in charge of Budgetary, Fiscal and Economic Affairs at the National Treasury last week while speaking at the Kenya Trade Week Expo in Nairobi said they had received stakeholder feedback on the impact of the interest rates cap and this would inform the next cause of action. He said that the team of experts is expected to begin work this week.
“Now that we have the feedback from the banking sector, traders and even SMEs, it can be used to make the right kind of adjustments.” Mwau said.
He also added that they were closely monitoring the difficulties that rose as a result of the law, while accelerating other reform measures to reduce the cost of credit.
Central Bank of Kenya (CBK) Governor Dr Patrick Njoroge who was also in attendance said they had held discussions with key stakeholders and arrived at a decision that the law was not the right one.
“It is true that interest capping is not a solution. Few Small and Medium Enterprises can afford to produce enough for the export market without sufficient credit to cover production costs. We are looking for a solution to the cap law.” said Dr Njoroge adding that the bank was working out “modalities” of enabling the SMEs access cheap credit.
“We still believe that the rate caps will be more detrimental but still the banks need to change their pricing models.” he added.
KCB Group CEO Joshua Oigara said, “As banks, we have to deliver affordable credit. However, NPLs are now almost at 10% in Kenya. A review of rate cap is needed”
