CAPPING INTERESTS IS A DANGEROUS AND UNTIMELY EXPERIMENT

This is the worst time to try the bank interest capping experiment. There are too many uncertainties currently in the economy and this could just be the medicine that killed the patient.

I also believe that the banks have many cards under the table that they can pull to kill the law. Their views and concerns should also be listened to. For instance, if every saving account is to earn an interest of up to 7% banks can introduce many impediments to maintaining a savings account. In addition, banks will engage in aggressive cost cutting including staff layoffs.

Furthermore, there is no law that says deposit services should be free banks will introduce many charges. The financial inclusion dream will be dead. Banks will only serve the rich whether for loan or deposit accounts. Owning a bank account will once again be a status symbol. We complain about low account on deposits but we have never asked ourselves how much it would cost to keep the cash ourselves.

To tame banks Government must tame itself first. It must reduce its domestic borrowing something that wouldn’t happen any time soon.

I am for all things low interest but we must be sober on how we approach the issue. Interest caps if any should be based on evidence that takes into consideration everyone’s interest. The government borrowed KShs 506 billion in domestic market last year and this year it will borrow more.

There are very many reasons why the bill is basically dead on arrival. I believe the President will not sign the bill. If he does save this post for future reference.