Kenya’s interest rate cap is slowing down the level of private sector lending, a banking industry said on Sunday.
Joshua Oigara, chairman of Kenyan Bankers Association (KBA) said in an notice in the Standard newspaper that over the past three years, both industry and government policymakers have monitored the impact of the interest rate cap with majority of stakeholders concurring that the law was well-intended but has resulted in unintended consequences, including reallocation of capital from where it is needed most.
“Lending has reduced by more than 1.2 million accounts. The net effect of the capping has been a slowdown in lending which has impacted businesses and households,” Oigara said.
According to KBA, prior to the interest rate cap, the banks’ micro, small and medium enterprises portfolio grew at a rate of 15 percent annually.
“This reduced to about six percent by September 2016, when the caps were introduced,” he noted.
The banking lobby said that it supports President Uhuru Kenyatta’s memorandum asking parliament to support a repeal of the interest rate cap because it will provide an opportunity for further engagement towards making credit more accessible to micro, small and medium-sized enterprises which have been adversely affected by the legislation.
Oigara promised that banks will continue to roll out innovative products which are affordable and accessible to the private sector. Enditem