Bankers oppose more powers for MPs as real estate investors welcome housing fund plan

Bankers and micro-finance institutions are opposed to the vesting of too much power in parliament and denying the same to Treasury and the Central Bank of Kenya.

They see the new draft as imposing extra costs to taxpayers and robbing critical offices of power to take important decisions.

Further they wondered why parliament should presume oversight for institutions in which it had no expertise.

Appointment of chairman for the Central Bank, they argued, would politicise the institution and impose unnecessary costs for a role that could not be properly defined.

“Parliament cannot be experts in every situation. It should accept that other institutions should be facilitated to play their roles of efficiently managing this country.  We should limit the role Parliament oversight should play,” said Mr John Wanyela, the CEO of the Kenya Bankers Association.

The newly published draft constitution proposes that there will be a controller of budget (COB) who is charged with overseeing the implementation of the national budget and is ultimately answerable to parliament.

The holder of the office is supposed to ensure that this is in accordance with the proper parliamentary bills and providing accounts of actual as opposed to budgeted expenditure.

The draft law orders that the COB shall report to parliament within two months of the end of the financial year which is by August 31 of every year, to submitted his report.

To accomplish this within two months of end of fiscal year, critics say, would require a hefty amount of resources for this office including hiring of numerous accountants and premises to police each and every transaction in government and regional institutions.

The CEO of Association of Microfinance Institutions (AMFI), Mr Benjamin Nkunga, said that too much power had been given to parliament at the expense of the treasury.

He noted: “while the devolution of power is good, parliamentary role in some specific areas need to be controlled as well for we are yet to see serious people in government.”

The major change with regard to revenue collection and usage is on the formation of the National Revenue Allocation which is intended to ensure that the sharing is equitable as between the national government and the various levels of devolved government.

For the first time, the Central Bank of Kenya is to have a chairperson of the Board rather than the current situation where there the Governor is both the chief executive and the chairman of the board – an arrangement that has been criticised for lacking checks and balances in the institution.

Members of the board will be appointed by the president but with the approval of the national assembly.

A governor can be appointed for only one term of six years.

Unnecessary burden

“We would not support the creation of a Chairman’s post at CBK.  It is an unnecessary burden on the taxpayer for undefined value.” Mr Wanyela said.

The draft constitution also sets the criteria by which someone will be appointed governor.

Previously the president could pick virtually anyone – even with mere accounting experience – to head the institution but the draft law now requires that the person be schooled in economics, finance or accounting.

The definition of the role of the CBK is a bit more extensive and ambitious but, glaringly, leaves out the price stability function previously expressly stated in the CBK Act.

Mr Nkungi said that the drafters did not have the necessary skills to understand the meaning of managing inflation.

“Actually the Central Bank of Kenya should have contributed to the review of this section of the constitution. The public need to have confidence with the Central Bank of Kenya as a financial industry is easily affected by very simple changes and comments,” he said.

The draft says that the bank shall promote and maintain the stability of the value of the currency of the Republic, issue notes and coins, act as banker and financial adviser of the Government, conduct the monetary policy of the Government in a manner consistent with the relevant provisions of the law in the interest of the balanced and sustainable economic growth of the Republic.

It also – quite controversially perhaps – states that the CBK shall “encourage and promote economic development and the efficient utilisation of the resources of the Republic, through effective and efficient operation of a banking and credit system.”

For one, “economic development” might call for clarification as opposed to the clearer parameter of economic growth expressed in form of gross domestic or national product. And the relationship between this role and that of the ministries of finance and national planning – that more specifically handle the development function – may have to be outlined.

The current CBK Act says that “the principal object of the Bank shall be to formulate and implement monetary policy directed to achieving and maintaining stability in the general level of prices.”

The simple meaning of this is that the CBK should be concerned with inflation since it is the key gauge of the movement of prices.

Some countries even set an inflation target as a way of ensuring that the central bank deviates very little, if at all, from it thereby keeping prices fairly stable in the economy.

Since independence successive presidents have always had their pictures grace the coins or notes although in the Kibaki regime only the commemorative Sh40 coin has his portrait.

Portrait of individual

The new draft law now says notes or coins issued by the central bank “may not bear the portrait of any individual” but can carry images that depict or symbolise Kenya or an aspect of Kenya.

It is envisaged that there may be misuse of taxpayer resources within some of the devolved regional governments.

In this regard, the Treasury in concert with the finance minister shall be empowered to protect taxpayers by stopping “the transfer of funds to a State organ or any other public body or entity only for a serious material breach, or persistent material breaches” of the law though this “may not stop the transfer of more than fifty per cent of funds due to any devolved government.”

This decision by the treasury is only enforceable for sixty days unless it is also subsequently approved by parliament.

In approving the stoppage of funds transfer, the house shall receive a report of the Controller of Budget and “the affected devolved government shall be informed of the material breach and be given an opportunity to answer the allegations before the relevant parliamentary committee.”