First-time Kiambu MP rattles banks with interest rates Bill

When Jude Njomo introduced a Bill in Parliament in December seeking to cap bank lending rates, the reaction was timid.

After all he was not the first legislator attempting to take on commercial banks long accused of suppressing growth through expensive lending to businesses. Two others had attempted and failed.

Months later today, the first-time Kiambu MP has become a household name and cheered on by many who hope President Uhuru Kenyatta will assent to the proposed law and compel banks to lower their lending rates.

Njomo’s Banking (Amendment) Bill 2015 has no doubt rattled titans in the banking amid intense lobbying to persuade President Kenyatta to reject the proposed law.

The anxiety caused by the Bill perhaps best played out on Wednesday during a joint meeting between bank executives and Central Bank of Kenya governor Patrick Njoroge in Nairobi.

The usually confident and vibrant CEOs were reduced to talking in hushed tones — typical of a meeting of convenience. The controversial Bill has brought unity of purpose among the bank executives with a prime of goals of shooting down the ambitions of one man — Njomo.

Bankers are aware the momentum is building against them and even sought to appease Parliamentarians with a memorandum of understanding (MoU) that creates a Sh30 billion fund to be lent out to small and medium sized enterprises (SMEs) on concessionary rates.

Njomo, however, says he is unimpressed by the bankers’ move arguing the MoU needs to be anchored in law through a Bill so as to commit the lenders to their promises.

He recommends banks to set aside 30 per cent of their loan book — about Sh600 billion – for SMEs.

The 51-year-old MP is unperturbed by the lobbying bank CEOs even as he continues enjoying the limelight as the people’s champion.

The father of four admits he has loan facilities but points out that his push for regulation of interest rates is not driven by personal bias but an obligation to protect the public.

Overwhelming support

“Of course I have also borrowed just like every other Kenyan but this is not a personal, it concerns the whole republic,” he told the Business Daily.
Njomo’s confidence is anchored on the overwhelming support from Parliament that passed his Bill after legislators were convinced by his 2,000-word report detailing why caps would be necessary on bank lending rates.

Besides, his Bill comes under a more democratic legal regime which gives Parliament powers to veto the President in case he declines to sign the Bill into law.

Only recently in August 2015, attempts to cap bank interest rates through a Bill by Gem MP Jakoyo Midowo flopped on a technicality after the Budget and Appropriations Committee said the proposed amendments to the Finance Bill went against Article 114 of the Constitution.

Mbeere South MP Mutava Musyimi, who chairs the committee, asked the Speaker to decline an amendment to the Central Bank of Kenya Act to cap rates filed by Mr Midiwo. He said any changes to a money Bill must be approved by the Budget committee after taking the views of Treasury, the CBK and other stakeholders in line with Article 114 of the Constitution.

Another legislator Joe Donde also unsuccessfully attempted to cap bank interest rates nearly 15 years ago. In his proposed amendments to the Banking Act, Mr Donde had argued then that at 24 per cent, the interest rates charged by the banks had made borrowing out of reach of many Kenyans.

READ: Eyes on Uhuru as MPs pass Bill capping interest rates

In addition, businesses were failing after banks moved in to auction them for failure to service loans due to the high interest rates, he argued.
The Bill, therefore, proposed to have the rates pegged on the 91-day Treasury bills with a margin of four per cent.

His Central Bank of Kenya (Amendment) Bill 2000 was, however, vetoed by then President Daniel arap Moi who cited anomalies. In a memorandum sent to Parliament and which sought to make amendments to the bill, Moi reminded the MPs that State control of interest rates would be against the spirit of the liberalisation policy.

Another bone of contention between the President and Donde was the requirement that a nine-man committee be formed to be in charge of formulating and implementing monetary policy.

Moi’s amendment proposed that the committee should have 10 members, including the governor of the Central Bank, his deputy, the chief economist and seven others, two of whom must be women.

The President further wanted the role of the committee to change from being proactive to that of an advisory one.

Unlike Mr Midiwo who used strong words against banks Mr Njomo cuts a diplomatic figure — very calculating in his move.

“I am not against banks making profits, but what we are against as legislators are banks making so much profit, and other businesses that borrow money from banks to do business do not make any profit,” he says.

Mr Njomo has had his moments of controversy notably when he was quoted in 2013 as having said he would quit his position if MPs salaries were slashed as had been recommended by the Salaries and Remuneration Commission.

He, however, maintains he was misquoted by the media.

Mr Njomo was born in Kiambu where he attended Riara Primary School, before joining Kanunga Secondary School where he sat for his A-levels. He joined Kenya Polytechnic, the current Technical University of Kenya, and trained in electrical engineering.

He was employed by Kenya Power and Lightning Company (Kenya Power) before branching to private business and later joining politics.
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