, NAIROBI, Kenya, Aug 10 – Commercial banks through their umbrella Kenya Bankers Association have presented a Memorandum of Understanding to the Central Bank of Kenya intended to address the high cost of borrowing locally.
KBA Chief Executive Officer Habil Olaka, while presenting the MoU to the CBK Governor said the document will cover immediate steps and other actions banks have committed to do to lower interest rates in the country while still retaining free market principles.
“As KBA, we are committed to bringing down the cost of borrowing and enhancing access to credit at affordable rates, without introducing a control mechanism through legislation,” Olaka said.
The steps include reducing interest rates and notifying customers immediately and cancellation of account closing charges.
Banks shall also commit to allocate Sh30billion to enhance financial access for SMEs from which Sh10billion shall be dedicated to women and youth-owned micro-enterprises.
To further incentivize the offer, lending rates of this fund will be concessionary and will not exceed 14.5 percent.
The MoU further illustrates banks committing Sh100 million to technical assistance programs for micro, small and medium sized enterprises, towards enhancing their ability to secure financing from banks.
Other measures outlined include working with KPMG to enhance ethics, governance and banking polices, and the use of a credit reference bureau framework.
The MoU comes at a time when Parliament has presented the Interest Rates Bill 2015 to President Kenyatta for assent.
The Bill demands banks to cap their interest rates to 14.5 percent which KBA and CBK have strongly opposed.
“We appeal to His Excellency the President to consider the proposed measures and interventions presented by the sector in consultation with CBK and National Treasury, and we request that His Excellency not to assent to the Bill,” he said.