Analysts see Kenya’s Equity bank benefitting most from the lifting of the interest rate cap REUTERS/Thomas Mukoya Kenya has lifted its interest rate cap, in a move meant to revive shrinking credit access to the private sector.
Parliament failed to raise a two-thirds-majority which would have allowed it to push through the crucial Finance Bill 2019 with the cap intact, which President Uhuru Kenyatta had refused to assent to . The vote, held on November 5th, effectively ended Kenya’s experiment with rate caps, which were first introduced in 2016.
Kenyatta signed the bill two days later, meaning that banks are now free to determine what interest to charge on credit.
Kenya’s top bank executives, and Central Bank Governor Patrick Njoroge, have repeatedly blamed the rate cap for the declining access to credit, as banks preferred to loan to low-risk borrowers such as the government and large corporations.
On the other hand, legislators, some of whom stormed out of Parliament after the vote, have insisted that the cap was necessary to protect borrowers from high interest rates.
KCB Group CEO Joshua Oigara, however, doesn’t think rates will rise s harply any time soon because “The macroeconomic and business environment where we are today does not at all support an environment of high rates.” “Customers with high-risk profiles we may see a 2-3% increase. We are not going to see a massive change. As a leader in the industry, we don’t see an opportunity to go back to the old behaviour of high rates,” he added.
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