We’ve Learnt Our Lessons: President Uhuru Endorses Plans to End Cheap Loans for Kenyans

Plans to review the interest rates cap law has received a backing from President Kenyatta, who admitted that the policy has failed to achieve its intention of increasing credit access to traders.

Speaking at the Chatham House, London on Tuesday, President Uhuru announced plans by the government to either scrap or modify the law limiting the interest rates on loans by commercial banks in Kenya.

“It is clear to all that this was going to be the way to make capital available to SMEs [small and medium enterprises] …at a much more affordable rates. It is now obvious that actually that has not transpired and that is why we need to re-look that law,” said President Kenyatta.

In September 2016, Kenya capped commercial lending rates at 4 percentage points above the Central Bank’s benchmark rate, which is currently at 9.5 percent.

The capping was aimed at limiting the cost of borrowing for businesses and individuals. It also aimed at helping small traders’ access loans at affordable rates.

“We have learned our lessons … we recognise the limitations of the law in the way it is currently structured,” Kenyatta said in a speech at London think-tank Chatham House.

“We recognise there is a need to repeal it altogether or modify it to deal with some of the issues and the concerns that have been raised, especially from the financial sector.”

Kenyatta further said that Parliament and other stakeholders were deliberating to see what could be done to address the issue.

“This is a work in progress but we hope that in the upcoming finance bill for 2018/19 we will have engaged positively with all stakeholders to deal with the original problem and ensure we remove these caps that ended up hurting our financial sector.”

In introducing the capping, the government claimed that banks had been reaping high profits without benefiting customers.