President Signs into Law Banking Act 2015
President Uhuru Kenyatta has signed the Banking Act 2015 into Law.
Commercial banks have lost their bid to do away with interest rate controls, after President Uhuru Kenyatta signed Kenyatta the Banking Amendment Bill 2015 into law.
The move effectively limits the interest rates charged by banks to 4% of the Central Bank Rate. With the CBR currently at 10.5%, banks cannot charge higher than 14.5% as interest on credit.
The signing of the bill into law brings weeks of anxiety to an end with legislators and banks alike throwing arguments and counter arguments as to the merits and demerits of interest controls.
President Kenyatta noted with concern that despite previous attempts to dialogue and lower interest rates, banks had failed to live up to their promises with interest rates ever rising.
“Upon weighing carefully all these considerations, on balance, I have assented to the Bill as presented to me. We will implement the new law, noting the difficulties that it would present, which include credit becoming unavailable to some consumers and the possible emergence of unregulated informal and exploitative lending mechanism,” President Kenyatta said in a statement.
The National Treasury, the Central Bank of Kenya and the banks have all been opposed to capping of interest rates arguing it would be counterproductive to the economy. Banks have one point said that with the interest rates caps, banks would be forced to turn away perceived risky borrowers, locking out millions from the credit market.
The head of state said the government would closely monitor emerging difficulties especially those considered most vulnerable from credit access. “Whilst doing so, my Government will also accelerate other reform measures necessary to reduce the cost of credit and thereby create the opportunities that will move our economy to greater prosperity,” the president stressed. Interest rates have averaged 18% 2016.
The new law also prescribes penalties for bank officials who violate the requirement.
Among those who applauded President Kenyatta for his move is Pan Africa Forum Chief Dr. David Matsanga, who termed it a reprieve to Kenyans. “Banks can no longer continue to suppress Kenyans on interest rates over loans borrowed.” Matsanga said during a live broadcast on Africa Business program at Punchline Africa TV.
|Samuel Tarwish is a career journalist with vast experience in writing and reporting in Politics, business, human interest and feature stories. He has covered major events in Kenya including 2010 referendum on the new constitution and its promulgation, elections in 2013, attack at the Westgate Shopping Mall in September 2013. Currently, Punchline Africa TV’s Senior Correspondent-Africa.|