Interest Rate Kenya's president signs bill seeking to reduce lending rate

The Banking (Amendment) Bill, 2015 will ensure that interest rate charged by banks do not go four percentage points above the Central Bank's benchmark rate.

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Kenya's president signs bill seeking to reduce lending rate play

Kenya's president signs bill seeking to reduce lending rate

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The President of Kenya, Uhuru Kenyatta has signed into law, a bill which aims to cap interest rate charged by the various commercial banks in the country.

The Banking (Amendment) Bill, 2015 will ensure that interest rate charged by banks do not go four percentage points above the Central Bank's benchmark rate.

The banking industry in Kenya was vehemently against the bill as it set out to control of how much they could charge customers.

According to  Habil Olaka, the chief executive officer of the Kenya Bankers Association, the move will force banks to retreat to ‘safer bets.’

“Currently, the segment that will have been excluded when the law comes into place because the easiest thing to do will be to retreat back to the safer bets, you lend to the high-quality borrowers and effectively ignore the high-risk ones and yet those are the drivers of economic growth in this country.

Therefore we have to remain responsible, ensure that we still bring the SME sector into the fold of formal financial inclusion and still operate within the new law,” said KBA CEO.

Access to capital is one the major challenges for young entrepreneurs and farmers so this law has been heralded by many Kenyans. Others across the continent such as Ghana would be looking forward to something similar.

READ ALSO: Interest Rate Policy to tackle lending rate to be presented to cabinet for consideration

In June, Ghana’s Minister of Trade and Industry, Ekow Spio Garbrah, disclosed that a document proposing how to reduce the country's high lending rate was to be presented to cabinet this for consideration.

“We have created an expert group of some 15 economists from the University of Ghana, some policy think tanks, Bank of Ghana, the finance ministry and we just prepared a cabinet paper that is going to cabinet this week talking about the various things we think the BoG and other institutions can do to find a way to control interest rate amongst other things.”

"...In Ghana, we are doing 30 to 100 percent interest rate. That is a recipe for killing businesses" he lamented.

However, three months on, there has been no update on that document.

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