NAIROBI, Kenya, Aug 24 – “Banks’ honey jar has just been tipped over,” one of the more than a thousand tweets reads barely two hours since signing of the Banking (Amendment) Bill 2015 by President Uhuru Kenyatta.
“President Kenyatta has just garnered hundreds of thousands of votes with the stroke of a pen, #InterestRatesCappingBillSigned,” another participant writes.
“Thank you Mr President! Once again, you’ve proved my thoughts right! As a businessman in this country and one who cannot do business without bank loans, I know what it has taken you to assent to this and also know what it takes to repay a loan at high interest rates! I can only say it will be better! Thanks once again for having the feelings of Kenyans at heart! It will pay off!” another one wrote.
The three participants are part of Kenya’s fierce micro blogging sphere and seem to be speaking on behalf of many. In fact, the last two weeks has been buzzing with activity with Kenyans online urging the President to sign the bill and finally speak on behalf of the majority.
“Since receiving this Bill, I have consulted widely and it is clear to me from those consultations that Kenyans are disappointed and frustrated with the lack of sensitivity by the financial sector, particularly banks. These frustrations are centred around the cost of credit and the applicable interest rates on their hard-earned deposits. I share these concerns,” President Uhuru Kenyatta said in the official statement, following the signing of the Bill which limits how much interest commercial banks can charge on a loan.
Offline, the story is almost similar. After taking to the streets of Nairobi, Capital FM Business would find out that a majority of Nairobi residents had sided with the President’s decision, calling it a redemptive move.
“The President’s move is a really good one. Finally we can afford to take loans,” Kevin Kamau a Nairobi resident said.
Another, Rachael Atieno, supported the government saying she would finally have some faith in the banking system; “it’s unfair that we make a bare 2 or 3 percent on our savings but have to pay up to 18 percent or even more when taking loans.”
Three more Kenyans supported the move, praising President Kenyatta for signing the Bill into law before Dennis Kiplangat said he wouldn’t care less as he stopped banking formally owing to high costs and inconveniences opting for mobile banking.
The Bill, which proposes among other things, to cap interest rates at 4 percent above the Indicative Central Bank Rate, was first sponsored by Kiambu Town MP Jude Njomo and was soon supported by many.
“It is the desire of Kenyans to have affordable interest rates. Banks have formed cartels to ensure high interest rates. The KBRR which is mandated to check interest rates appears to be a toothless bulldog,” Njomo told the media following the proposal.
“There are Kenyans who are suffering. Banks are here to help create employment, but all the profits businesses are getting are finding their ways back to the banks,” Deputy Leader of minority Jakoyo Midiwo and Gem MP said while supporting the Bill.
The Bill was then passed in Parliament against an outcry by Banks, their umbrella by Kenya Bankers Association (KBA) and Central Bank among other players in the highly profitable financial sector.
“One of the things that will be a consequence of the proposal means that the banks will have to assess the risk profile of the borrowers and it is only borrowers who fit within that risk profile that is legislated in the law that will then be accessible to credit,” KBA CEO Habil Olaka said at the time.
His sentiments were echoed by many which included financial experts who said the Bill would among other things, strain small banks who will be shut out from the inter-bank market and will have to mobilize funds at rates higher than what they will be getting, hence will only be able to lend out within the stipulated margins.
But Njomo and his colleagues, representing the concerns of many, came out strongly to defend the Bill saying it would ultimately do Kenyans more good than harm.