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Parliament will block any attempt to repeal rate cap, says MP

Nairobi, Monday

Parliament will block an attempt to repeal a cap on commercial lending rates, Jude Njomo, the legislator who sponsored the law imposing the cap said yesterday.

Introduced in September 2016, the cap limits lending rates to four percentage points above the central bank rate, now nine per cent.

It was supposed to cut the costs of credit for businesses and private consumers, boosting access to loans. In his budget speech to Parliament last week, Treasury Cabinet secretary Henry Rotich proposed repealing the cap.

Lending to customers

He said it was keeping banks from lending to customers they considered too risky. A similar attempt to remove the cap last year was rejected by lawmakers. Njomo, a Parliamentarian from the ruling party, said the Treasury was being obstinate.“These guys don’t want to accept the reality, so they keep on pushing. The reality is that the capping of interest rates is here to stay,” he told Reuters.

He accused the minister of siding with commercial banks, rather than the citizens. The law is changed by people who listen to wananchi (citizens) … That (proposed amendment) will not see the light of day,” he said. Private-sector credit expanded by 4.9 per cent in the year to April, the Central Bank said, well below the ideal growth rate of 12 to 15 per cent.

In March, the High Court gave Parliament a year to redraft the law capping rates, saying the original was not in line with the Constitution. Njomo said he has drafted a new bill to fix the wording in line with High Court’s ruling. “It has already gone through some of the steps it needs to before it is tabled in the house … we will do it within the time frame that was given by the High Court,” he said.

Kimani Ichung’wah, the chairman of National Assembly’s Budget Committee, also said he did not expect the proposed repeal to get through the house.“The government has a responsibility to protect borrowers,” he said.    – REUTERS

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