NAIROBI, Kenya Apr 16 – The government has lauded the decision taken by banks to lower their base lending rates.
Trade Minister Amos Kimunya said on Friday that the move was encouraging for borrowers who have for long complained of high interest charges that have constrained opportunities to expand business in the country.
Mr Kimunya said this would go a long way in making the country an attractive investment destination leading to overall growth of the economy.
“This is indeed laudable and is sending the right signals to the banking sector and this should be emulated by other banks as this is in tandem with improving the economic conditions in the country,” Mr Kimunya said at an event to flag off 300 Barclayclub members who were heading to the Maasai Mara.
Barclay Bank of Kenya and Co-operative bank have lowered their base lending rates by two and one percent respectively.
In the last twelve months, the Central Bank’s Monetary Policy Committee (MPC) has also slashed the Central Bank Rate (CBR) to 6.75 percent.
The first bank to respond was Barclays Bank of Kenya, which cut its lending rates from 15.75 percent to 13.75. Co-operative Bank followed slashing its base lending rate by one percent from 15 percent to 14 percent.
Mr Kimunya said it was time more banks took up the challenge in efforts to make credit more affordable.
Economic analysts have predicted that lower rates would translate to more uptake of credit, which would stimulate economic activity.
Banks have however been slow to respond arguing that the structural rigidities in credit supply inhibit lowering of rates adding it could be solved by offering more long-term loans.
The Trade Minister said the next challenge for boosting business will be to address other bottlenecks that make the cost of doing business remain high and avoid losing out to competition from the wider East African community.
“Now that interest rates are falling, I am hoping soon that other issues will be addressed to bring the overall cost of production down and make our goods more competitive,” he said.