NAIROBI, Kenya, Aug 24 – President Uhuru Kenyatta has finally signed into law the Banking (Amendment) Bill, 2015 aimed at regulating interest rates charged by banks.
He said since receiving the Bill, he had consulted widely and it was clear to him from those consultations that Kenyans were 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 Kenyatta said.
The eagerly awaited move is bound to cause a stir in the sector considering efforts by banks to have interest rates determined by the market.
President Kenyatta however recalled that this was the third time that the National Assembly was attempting to reduce interest rates to affordable levels.
“In the previous two instances, dialogue and promises of change prevailed and banks avoided the introduction of these caps. Banks failed to live up to their promises and interest rates have continued to increase along with the spreads between the deposit and lending rates.”
He said after taking all these considerations in account: “I have assented to the Bill as presented to me. We will implement the new law, noting the difficulties that it would present, which include credit becoming unavailable to some consumers and the possible emergence of unregulated informal and exploitative lending mechanisms.”
He says despite having one of the most efficient and effective financial markets, Kenya has one of the highest returns-on-equity for banks in the African continent.
Banks he noted, need to do more to reduce the cost of credit and ensure that the benefits of the vibrant financial sector are also felt by their customers.
The Bill was presented to the Head of State after it was passed by the National Assembly on July 28, 2016.
President Kenyatta said his government would accelerate other reform measures necessary to reduce the cost of credit and thereby create the opportunities that will move the economy to greater prosperity.
“We also reiterate our commitment to free market policies in driving sustainable economic growth, to which we owe much of our success.”