NAIROBI, Kenya, Aug 11 – A section of MPs say that the commitment by banks to lower interest rates is only acceptable if it is anchored into law.
Led by Kikuyu MP Kimani Ichung’wah, the MPs argue that similar pledges have been made in the past but were not honoured.
Ichung’wah’s sentiments follow the presentation of a Memorandum of Understanding by the Kenya Bankers Association to the Central Bank of Kenya that lists seven steps intended to be taken to cut the high cost of borrowing.
“Let them bring that MoU to Parliament so that we can pass it into law. We are more than willing to take into account these recommendations. Otherwise, telling us about an MoU that is not legally binding, they will trash it soon after,” Ichung’wah said.
The MoU has been deemed as a means to counter the Banking Amendment Bill which was passed by Parliament last week and forwarded to President Kenyatta where it awaits his assent.
Kiambu Town MP Jude Jomo, who sponsored the Bill, called KBA out for presenting the MoU at the time when it has asking why they had not attempted to do so before the Bill was passed.
Jomo also urged CBK Governor Dr Patrick Njoroge to not be swayed by KBA’s document saying it is deceiving.
“As you can recall, a similar Bill had been proposed 20 years ago. Bankers did the same thing they are doing today where they proposed to take measures that would bring down the cost of borrowing. Nothing ever happened as you know, since rates are still very high,” Jomo said.
“I therefore urge the President and the CBK Governor to not side with cartels but to side with the mwananchi,” he added.
While presenting the seven-step MoU to Dr Njoroge, KBA Chief Executive Officer Habil Olaka said the MoU would address the high interest rates by reducing them marginally. Other interventions suggested in the MoU are cancelling account closing charges, enhancing business models that have resulted to high cost of borrowing and enhancing ethics and banking practices.
Among the proposed interventions was also the promise to support SMEs by committing Sh30 billion to support them with Sh10 billion going to women and the youth. “We expect the lending rates on this fund to be concessionary and not to exceed 14.5 percent,” Olaka said during the presentation.
Reacting to the fund allocation, Jomo said funds are too little and would not help in spurring the economy to further development.
“By saying that the lending rates would be concessionary means that they admit that rates are too high in the country.”
On its part, KBA supported by CBK and the National Treasury have strongly opposed the Bill saying it would distort Kenya’s free market, discourage financial inclusion and promote informal lending channels among other predicaments.