Banks just can’t catch a break, can they? In December 2015, Jude Njomo introduced a bill to ostensibly tame obscene profits that banks in Kenya were deemed to be enjoying. Having appealed to the hearts and pockets of his fellow legislators, who had unfettered and exclusive access to their own parliamentary low rate mortgages with a Sh20 million limit, free car privilege for the first car and Sh7 million low rate loan for the second car, the interest rate-capping bill sailed through and was signed into law in August 2016.
The mischief that the legislators should have sought to cure was the undifferentiated risk pricing that banks were levying on borrowers. A borrower who had a long history of taking loans and repaying them successfully would be charged at the same rate as a new borrower with zero credit history, which was in the range of 19 to 30 per cent depending on the bank.
