Connect with us

Hi, what are you looking for?

Capital Business
Capital Business
The Bank said the drive is meant to strengthen its diversity and inclusivity focus as part of its sustainability agenda by simplifying financial inclusion for women/FILE

Finance

Oigara rules out massive loans repricing ahead of rate cap scrapping

The repeal of the cap has widely been debated by analysts, consumer groups, politicians and even in the media; creating fears that banks will reprice loans upwards/FILE.

NAIROBI, Kenya, Nov 6 – Kenya Bankers Association (KBA) Chairperson Joshua Oigara has clarified existing loans will not be priced afresh after the repeal of the interest rates cap.

Reacting to the decision by the National Assembly to lift the cap on interest rates, the KCB Group Chief Executive Officer said customers should not expect a sudden increase in the interest rates following the amendment of the Finance Bill, 2019 to accommodate the President’s Memorandum.

Oigara said allowing banks to price the risk of borrowers is important and the banking industry has over the last two years learnt a number of lessons in that regard.

Oigara said customers should not expect a sudden increase in the interest rates following the amendment of the Finance Bill, 2019 to accommodate the President’s Memorandum.

“The regime of the 20% interest rate is long gone. The macroeconomic and business environment where we are today does not at all support an environment of high rates,” said Oigara, who is also the Chairman of the Kenya Bankers Association.

“As an industry, we are in a new equilibrium. Banks have reached a new business model. We lend to current customers at 13% because we have accepted their risk profile as an industry. That will not change the next day. So the fear that there will be a massive repricing the next day is not true,” explained Oigara highlighted.

The net effect of the capping has been a credit squeeze and a slowdown in lending especially towards Small and Medium Enterprises, whose risk profile is perceived to be higher than that of bigger and more established businesses.

“Banks are ready to lend. So we are going to see more people including SMEs start accessing credit in the industry,” Oigara added.

The banking industry has over the last two years experienced the full impact of the amendments to the Banking Act made in 2016 introducing limitations on the chargeable interest on credit.

The unintended effect of the interest rates cap has a result been negative across the banking sector and the economy, especially among the SMEs, and any efforts to correct the situation will be good for every interested party.

Advertisement. Scroll to continue reading.

The repeal of the cap has widely been debated by analysts, consumer groups, politicians and even in the media; creating fears that banks will reprice loans upwards.

Click to comment
Advertisement

More on Capital Business

Executive Lifestyle

NAIROBI, Kenya, Mar 12 – The country’s super wealthy individuals are increasing their holding of bonds, gold and cash, a new report by Knight...

Ask Kirubi

NAIROBI, Kenya, Mar 9 – Businessman and industrialist Dr. Chris Kirubi has urged members of the public to exercise extreme caution when making any...

Headlines

NAIROBI, Kenya, Mar 18 – Commercial Banks have been ordered to provide relief to borrowers on their personal loans, with loans eligible from March...

Ask Kirubi

NAIROBI, Kenya, Mar 24 – Businessman and industrialist Dr. Chris Kirubi is set to own half of Centum Investment Company PLC, following a go-ahead...

Kenya

NAIROBI, Kenya, Jun17 – Kenya’s tea leaves manufacturer Kericho Gold, has been awarded the Superbrands Seal by Superbrands East Africa for their quality variety...

Coronavirus

NAIROBI, Kenya, Mar 22 – Airtel Kenya is offering free internet access for students in order to enable continued learning at home in the...

Coronavirus

NAIROBI, Kenya, Apr 13 – As the local telecommunications industry gears up to roll out 5G networks in the country, the Communications Authority of...

Headlines

NAIROBI, Kenya, Mar 16 – The World Bank has given the Kenyan government USD 60 Million (Sh6.1 billion) to help combat the deadly coronavirus pandemic...