The interest rate cap on commercial loans is no more. MPs effectively drove the last nail on its coffin when they failed to marshal enough numbers to overturn President Uhuru Kenyatta’s removal push during Tuesday’s Parliament debate.
If we are to be honest, the law was a failed experiment right from its effective date in September 2016. It particularly made nonsense of the Central Bank’s monetary policy function and a mockery of the very people it was meant to address their costly financial credit woes by sapping the few loans they could access.
And so it’s back to the free pricing market of yesteryears with the lenders already announcing plans to gradually raise their interest rates to match the risk as they increase lending to individuals and SMEs.
We hope that if banks have learnt a thing in the last four years, it is that they need to practice responsible lending. Before the caps they had come to behave like the very shylocks recently cited by the President in pushing for the removal of the controls.
Borrowers regularly complained about hidden charges that almost always saw them default on their loans and lose their securities eventually. Such predatory practices ruined many families.
We hope banks will conduct their business transparently in this post-rate cap era.