President Uhuru Kenyatta has rejected the 2019/20 budget demanding that lawmakers remove a cap on commercial lending rates.
In 2016, the government limited rates banks can charge customers to four percentage points above the central bank’s benchmark – currently 9% – saying they were concerned about high rates.
President Kenyatta is in agreement with the Treasury and the Central Bank of Kenya that the interest rate cap is hurting the economy.
Their argument is that the cap has cut private-sector loan growth because banks have avoided lending to customers deemed as risky, including small and medium-sized businesses as well as individuals who borrow for consumption.
Should MPs now agree with him and remove the cap, borrowers will be left at the mercy of banks on the one hand, while on the other, banks will have the freedom to price their loans depending on their risk assessment.
More to follow ……
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