The Standard on Saturday
Date: 20.06.2015
Page 18
Article size: 294 cm2
ColumnCM: 65.33
AVE: 150266.66
Taming bank rates could
help ease unemployment
Henry Munene
h m u ne n e flista rid a rd med i a.co. ke
donors (euphemism for expensive
That would arrest
international loan merchants) the
Bretton­Woods institutions (World
Bank and the Internationa] Mon­
the rise of loan
sharks who live off
the sweat of small
businesses
s the Central Bank
j\
etary Fund) suspended funding of
government operations at a time
when collection of tax money was
relatively poor and the budget de­
pended heavily on these lenders.
This meant the gov­
ernment had to keep
borrowing locally
through treasury
bills, which mature
very fast (90 days).
Patrick Njoroge pre­ Now the tendency to issue treasury
Governor nominee
These ef orts notwith­
standing, die lending
rates remained pro­
hibitive. Even after
the Jubilee regime
started borrowing
through international sovereign
bonds, ostensibly to force banks to
lend to businesses and expand die
economy, the competition among
the lenders has not translated into
lower rates.
Mukurwei­ini MP Kabando wa
Kabando last year, came up with a
I guess this must be that, instead of lending to Njoroge
brilliant idea that I reckoned would
steal the thunder from the banks
the most propitious or Omosh the businessman ­ who
when it comes to treasury bills and
pares to take office,
moment to take stock of the bank­
bills to plug budgetary holes meant
may switch off his phone and swear
never to pay ­ banks focused on
ing and lending sector and, as it
were, try to figure out where the rain funding Government's budget. It is
started beating us. I must, however, common sense, really. Why lend to
state from the outset that I'm not an people who are not sure of making a
profit when you can lend to the gov­
expert on banking and economics,
so whatever I say here could well be
comical fulminations of a layman.
First, lhave not heard of any bank
th at h a s made a loss th is year, or
even last year. Well, that's a good
thing, as only a sadist would wish
the bankers a loss­making plague.
At face value, this profitability
i he overall effect was
T:
' that the economy
stagnated or grew
sluggishly, not cre­
ating enough jobs to
absorb the ever­in­
pansion across all the sectors of the
economy.
OTiomy,
tried to reverse the situation when it
ous economic growth. Except that
at the same time, the money lenders
are on a historic roll of fortune, we
have to grapple with mass unem­
ployment and lack of cash for ex­
f you are looking for the tip
of diis iceberg, I suggest
you look no further than
started issuing long­term bonds lieu
the commercial banks'
This effectively opened floodgates of
lending rates. Even after
, the introduction of the
Kenya Banks' Reference rate by rhe
Central Bank of Kenya, the cost of
loans remains sky­high.This sit­
uation took root hi the 90s when
bonds. Through a bill tabled in the
I louse last year, Kabando suggest­
ed the lowering of the threshold of
lending to the State through bills
and bonds.
The idea was, instead of one be­
ing asked to cough up a minimum of
ernment?
creasing armies of unemployed
youth. It also meant barddng ser­
vices were the preserve of a select
few. I have told you before how a
teller told me to stop dreaming of
opening an account there with my
malnourished paysiip.
Of course the Kibaki regime
streak could be a pointer to boister­
I
who had no definite source of in­
come to open an account.
of the 90­day treasury bills that are
so beloved of our commercial banks.
unsecured loans for salaried people
and all manner of business loans.
Thebanks had,inane fellswoop,
been forced off their high horse. The
same guys who scoffed at my scraw­
ny paysiip now even sent hawkers
Shi 00,000 to lend to die government
through bonds and bills, Kisoi the
jua kali merchant could now lend
his Sh5,Q0O to the State via mobile
ni o n ey trail sf er. Th is wo u 1 d a u to ­
matically have broken the commer­
cial banks' and other large lenders'
stranglehold on the bonds and bills
market, with impressive implica­
tions in terms of wealth distribution.
What a brilliant idea if that ws if it
had taken root!
Writer is a Revise Editor for The
Standard
to the streets to request even people
// The Kibaki
regime tried
to reverse the
situation when
Ipsos Kenya ­ Acorn House,97 James Gichuru Road ­ Lavington ­ Nairobi ­ Kenya
The Standard on Saturday
Date: 20.06.2015
Page 18
Article size: 294 cm2
ColumnCM: 65.33
AVE: 150266.66
it started issuing
long­term bonds
Ipsos Kenya ­ Acorn House,97 James Gichuru Road ­ Lavington ­ Nairobi ­ Kenya