Bank stocks at the Kenyan bourse rallied on Wednesday a day after parliament voted to repeal a law capping interest rates.
Kenya Commercial Bank (KCB), Equity Bank and Cooperative Bank are among the stocks whose prices surged in the Wednesday trading at the Nairobi Securities Exchange (NSE) as excitement greeted the sector following the change of law three years since it was imposed.
KCB rose 6 percent to trade at 53 shillings (0.50 U.S. dollars), Equity Bank 5.5 percent to hit 0.50 dollars while NCBA 5.2 percent to 0.35 dollars, with other bank stocks following the trend, which started last week.
The rally helped lift all the key indices of the market with the benchmark NSE 20 share index closing Wednesday 36.65 points higher at 2,766.77 points as investors wealth, measured by market capitalization rising 1.4 percent to 25 billion dollars.
Kenya in 2016 capped commercial bank lending rates at 4 percent above the Central Bank Rate, which currently stands at 9 percent.
Kenyans have been paying 13 percent rate on money borrowed, with interest charges therefore expected to surge up to 20 percent, the point they were before the rate ceiling.
The MPs on Tuesday failed to raise the requisite numbers to overturn a memo from President Uhuru Kenyatta who had rejected a proposed law from parliament that had retained the caps, calling for the removal.
The law is, therefore, awaiting assent from Kenyatta before it takes effect immediately, as borrowers become a worried lot.
However, banks have moved to assure Kenyans that interest rates would not change drastically.
“The regime of the 20 percent interest rate is long gone. The macroeconomics and business model in which we now do not support environment of high rates,” said Joshua Oigara, KCB chief executive. Enditem