NAIROBI, Kenya, Apr 9 – Kenya Association of Manufacturers has welcomed Barclays Bank of Kenya’s move to reduce its base lending rate by two percent saying it will go a long way in stimulating access to credit for the private sector.
Chairman Vimal Shah said this shows that Barclays is adding value to Kenya\’s competitiveness and expressed the private sector’s desire to see more banks follow the trend.
“We expect all other banks to follow suit in view of the improving economic scenario and the opportunities presented by East African Community Customs Union, “ said Mr Shah.
The Barclays on Wednesday announced that it has cut its lending rates from 15.75 percent to 13.75 percent as a response to the Monetary Policy Committee’s signals such as the lowering of Central Bank Rate (CBR).
In a statement released Barclays said the cut was in tandem with a slide in the yield curve and signals from the national central banks of the EAC Member States.
Before Barclays took this step, the MPC had in about 12 months slashed the CBR sixth time to 6.75 percent but this had not translated in competitive lending rates.
The banking industry has been basing their reluctance to follow suit on the structural rigidities in credit supply which they argued can only be solved by having longer term loans.
While acknowledging MPC’s move, Barclays pointed out that with the more stable inflation environment which in March stood at four percent, there is more room for the committee to cut the rate further.
Focus now shifts to the other banks that are likely to respond to Barclays move in a bid to stay competitive.
While that plays out in the short term, the Central Bank of Kenya and the industry stakeholders have been mulling ways of developing longer term loans which has been touted as one sure way of lowering interest rates in the country.
This would address the structural issues faced by the banks and motivate them to lower their rates.