Zachary Ochuodho @zachuodho
National Treasury says it will “modify” the interest rates caps rather than “repeal” it as widely anticipated to ensure smooth implementations of the monetary policy.
Interest rate capping was signed into law in September 2016 to put a caveat on commercial bank lending rates at 4 percentage points above the Central Bank’s benchmark rate.
The move is said to have inhibited the small and medium enterprises (SMEs) from accessing credit which is critical to their growth and expansion.
Speaking yesterday during a consultation forum in Nairobi on Green Bond, Geoffrey Mwau, director general, budget, fiscal and economic affairs said the interest rate capping will be modified to enable monetary policies to have an impact.
“We can’t live with a cap which is inhibiting implementation of monetary policy. We are going to come with a proposal that has a more flexible option,” he said on the sidelines of the forum.
Mwau said the government wants to modify substantially the interest rate caps in a bid to ensure access to credit while at the same time bearing in mind that the high cost of credit is not good for economic growth. He said some people are taking advantage of lack of credit to impose exorbitant rates on desperate people who require loans to grow their businesses.
“We have a lot of predatory lending out here, which we want to regulate,” he said. Mwau said an individual has reported to the National Treasury how he borrowed Sh200,000, of which he has managed to repay Sh140,000 in a year but was still getting demands to repay Sh540,000.
“There is a lot of other malpractices that make accessing credits very costly and very difficult. So, we want to actually regulate market conduct. And all those people who are lending; whether you are lending without even taking deposits, you are going to be subject to that, so that we can endure that consumers don’t suffer,” he said.
Mwau said Kenya has implemented some projects with “Green Bond” connotations. The projects, he said include the solar, geothermal and biogas which will do not have an adverse impact on climate change.
Olumide Lala, Climate Bond Initiatives Africa programmes manager, said Kenya is losing 5.5 per cent of her gross domestic product (GDP) annually to the climate changes, which implies that every person in Kenya was losing $80 (Sh8,086) per month as a result of climate change.
Central Bank Governor, Patrick Njoroge, said climate change in Kenya is a real problem which needs to be dealt with, adding that the faster it is controlled before the crisis hits, home the better. He said the proceeds of the green bond will be used for financing or refinancing of the green projects.
“It will address some of the concerns which the countries appear to have on the planet,” he said. Njoroge said there is a clear pattern of flooding after four years and the cost of the floods could be avoided if the cost of plastics were incorporated in the cost of what causes the problem.