Business Daily
Date: 04.08.2016
Page 11
Article size: 393 cm2
ColumnCM: 87.33
AVE: 165933.33
Uhuru has more to do than accepting, rejecting interests law
One of the beautiful things
about Kenyan democratic
set­up is that it allows each
of the three arms of government to
have a say.
The vested and competing inter­
serves to save or reverse disastrous
From the day MPs passed the
banking amendment Bill
2015, banking sector players
and financial experts have had var­
ied opinions.
Kenyans have often criticised
their MPs for being insensitive to
their plight. Many have argued that
decisions such as the controversial
motions tabled in Parliament have
security and media laws.
The interest rate caps law recent­
ly passed fall under this category in
terms of controversy and impact. The
big question is ­ should the President
assent to the laws to cap bank loan
interest rates? Is capping interest
rate a "red herring"? Are there other
issues that should be brought to the
not been reflecting the aspirations
and desires of Wanjiku. Of particu­
lar concern to Kenyans is that when­
ests from the three arms sometimes
ever MPs have an issue that concerns
discussion table?
The President should establish
The Central Bank of Kenya: The regulator should control growth of banks file
the causes of the high interest rates
regime in the country. The questions
Shl.5 trillion. Parliament which has
the President's handlers should be
been bayingforthe blood of bankers
should now contain unhealthy GOK
borrowing appetite.
Therefore, to reduce interest rates,
the government must stop gate crash­
ing into the local money market.
But again, banks have been pur­
suing reckless expansionist policies
through opening branches locally and
regionally, creating huge loss­mak­
ing cost centres that must be serviced
through high interest rates.
asking is what else should have been
"capped" first before considering
regulating interest rates.
Which is the elephant in the room?
Firstly, the government has contrib­
uted to the current high interest re­
gimes by heavy borrowing in the local
market, thereby crowding out the pri­
vate sector who have had to compete
for the funds.
To bring down interest rates, the
government must behave responsibly
by reducing wastage captured by the
Bank shareholders and directors
within KRA revenue collection that
should think twice when approving
"flowery strategic plans and unreal­
istic growth projections that are not
in tandem with revenue generation
capacity.
grew by 13 per cent last year.
Thirdly, inflated figures in the gov­
ernment system should be addressed:
the Budget should be nowhere beyond
sider, through CBK, "capping" growth
of banks so that there is no pressure
to overcharge customers to fund spi­
Auditor General.
Secondly annual growth of gov­
ernment spending should tamed to
The Executive should also con­
ral ling expanding networks. Annual
bank network expansion should be
capped at 10 per cent.
Those using shylocking to arm­
twist the government are shedding
crocodile tears. The Executive should
allow informal lending to thrive to
create new levels of competition to
banks.
The CBK governor must pursue
pragmatic policies in the banking
sector to reduce duplication and
wastage that is driving up the cost
ofborrowing.
CBK must insist a paradigm shift
in the way banks conduct business to
them, they quickly close ranks and
vote unanimously.
It, therefore, came as a surprise
to many Kenyans that MPs could
also unite to safeguard the interests
of poor Kenyans. Indeed, this is the
first Bill, other than their remunera­
tion that has seen MPs speak with
one voice.
Given that this is the th ird attempt
to rein in on rogue banks, Kenyans
will be waiting for the day when this
law will get assent.
Some "financial experts have ar­
gued that regulation of interest rates
will have far­ reaching consequences.
The Kenya Bankers Association has
been stating that regulating interest
rates will exclude high risk borrow­
ers from accessing loans. This argu­
ment fl ies in the face of an obvious fact
that a maj ority of Kenyans can't afford
loans at current market rates.
With CBK having exhausted
reduce cost which should translate to
all measures to make commercial
lower interests.
banks more affordable, let interest
rates charged by commercial banks
JoeMusyoki,
Kitengela
be entrenched in law.
Collins Musanga,
Kakamega
Ipsos Kenya ­ Acorn House,97 James Gichuru Road ­ Lavington ­ Nairobi ­ Kenya