Kenyan banks have termed the move by parliament to cap the price of loans at only 4 per cent above the CBK reference rate as retrogressive.
Acccording to the Kenya Bankers Association (KBA), individuals and small and medium sized enterprises, who are presumed to have a higher risk of defaulting, will be locked out of the credit market if the Bill is signed into law.
The MPs had defied strong lobbying by commercial banks to unanimously pass a Bill that intends to regulate interest rates applicable to bank loans and deposits, and prescribes punitive penalties for bank officials who violate the requirement. The Banking (Amendment) Bill, 2015, provides that banks shall not charge interest above four per cent of Kenya Banks Reference Rate (KBRR).
The new law will see a sharp decrease from the current average lending rate of 18 per cent, as per Central Bank of Kenya (CBK) data. In fact, some banks have been currently charging as high as 24 per cent for short- to medium-term loans.
