Parliament in fresh bid to control bank interest rates

Gem MP Jakoyo Midiwo has launched a fresh attempt to control interest rates, just three months after a similar move failed in April.

Like in the last attempt, Mr Midiwo who serves in Parliament as joint Chief Whip is seeking to tame banks through an amendment to the Finance Bill 2012, whose introduction to the House was shelved on Tuesday due to the absence of Finance minister Njeru Githae.

“We are going to propose amendments to the Finance Bill 2012 to provide for controls on interest rates charged by State-controlled National Bank, Consolidated Bank and Kenya Commercial Bank (KCB) to protect Kenyans from being fleeced by the lenders,” Mr Midiwo said.

“Nothing stops the government of President Kibaki and Prime Minister Raila Odinga from controlling interest rates,” the MP said, adding that interest charged by State-owned banks could be controlled even in a free market economy.

Opponents of interest rates control have argued that such a regime would make Kenya unattractive to foreign investors and restrict lending on the domestic front to a small fraction of potential borrowers who are less risky to the banks.

Mr Midiwo’s script appears to control the interest rates charged by State-owned banks and make them act as benchmarks for other lenders.

The MP plans to back that move with the removal of Women Enterprise Fund (WEF) and the Youth Enterprise Fund (YEF) from control of other commercial banks and restricting their handling to banks whose interest rates are capped.

“Billions of shillings of YEF and WEF that are given to commercial banks to lend is being disbursed at interest rates of more than 30 per cent when the government has recommended the youth and women access the funds at eight per cent,” he said.

Mr Midiwo said he would seek to amend the Finance Bill to ensure that the funds meant for the poor reach them at affordable lending rates.

“We will win this war as was the case in Brazil recently,” he said, adding that commercial banks should not be allowed to exploit the people using government resources.

While initiating debate on Consumer Protection Bill 2011, Mr Midiwo said the government had the means to effectively deal with many of the things that are hurting Kenyans.

When Mr Midiwo last introduced amendments to the Finance Bill seeking to control interest rates, the effort was defeated through a trade off with the Finance minister that saw the MPs walk away with enhanced terminal benefit perks.

“Kenyans are suffering from exploitation by profit-driven banks and we must continue in the search for a regime that will give them low interest rates,” he said.

MPs also gave the Finance minister a notice of intention to amend the controversial VAT Bill 2012, which they argue will make essential commodities unaffordable to the poor.

Yesterday, Mr Midiwo got the support of a number of MPs who insisted that the quest to shoot down the VAT Bill and cap interest rates was not meant to control trade, but to protect consumers from excessive pricing of essential goods, including money.