KCB chief executive officer has backed the scrapping of the law that capped interest rates in Kenya at 14 per cent.
While speaking when he released the end of year results for the bank, Mr. Oigara said that KCB was fully behind the latest efforts aimed at scrapping the law.
The current interest rates in Kenya have been blamed for the current shortage in loans that has left many Kenyans struggling to have their loans approved.
“Credit growth has been a big challenge for us. We are a proponent of the review of the rate cap. The flow of credit should be controlled by market forces,” said Mr Oigara. “We are willing to give up some sector limits. For instance, mortgage rates to students straight after campus can be capped at certain levels. This model works in other markets. It can work here too.”
Interest rates in Kenya have been the bane of bad blood between borrowers and banks.
Already, the government has made a commitment to the International Monetary Fund (IMF) that will see the interest rates in Kenya law repealed by September this year. “In support of this request, the authorities have committed to policies that will help achieve the programme objectives, including reducing the fiscal deficit and substantially modifying interest controls. Discussions on the details of these policies will continue in the coming weeks,” says IMF team leader Benedict Clements.
Lenders reacted interest rates in Kenya by shifting to lending to government, arguing that they were unable to price in risk for customers, especially SMEs which tend to carry a higher default rate.
They are now promising to put measures into place to ensure that interest rates in Kenya do not spike back to the days of yore.
“We will be looking for a total removal of the cap. We now have in place a number of measures, some ongoing, addressing concerns around opacity in pricing of loans through the cost of credit website that allows borrowers to compare loan charges comprehensively across different banks,” Kenya Bankers Association (KBA) chief executive Habil Olaka said.