The Association of Insurance Brokers of Kenya (AIBK) has backed the new law capping interest rates charged by commercial banks, saying it will positively impact the sector and the whole economy.
The Banking (Amendment) Act 2016 sets the maximum lending rate at four percentage points above the Central Bank Rate (CBR) and the minimum return payable for customer deposits at 70 per cent of the policy rate.
The CBR currently stands at 10 per cent meaning banks are barred from charging loan interest above 14 per cent.
“We are still waiting to see the full impact of the capping of interest rates. However, with lower rates we believe this will spark off credit thereby making money more available to productive areas of the economy, including infrastructural development and more investment in productive areas. This will directly open up new business opportunities for the insurance sector,” said chairman Nelson Omolo.
Mr Omolo said the insurance sector has been grappling with many issues that have seen penetration go down from three per cent of GDP in 2015 to stand at 2.7 per cent.
“We acknowledge that as a sub-sector of the Financial Services sector, we need to step up and aggressively position ourselves as the panacea to this problem. We would like to encourage Kenya’s population to consult brokers to explain the fine print as well as best options in terms of insurance coverage,” said Mr Omolo.