Don't usurp central bank’s role with a 'consumer protector'

Parliament firmly introduced the interest rate caps through the Banking (Amendment) Act, 2016 which came into force on September 14 that year. This popular stance came during an emotive electioneering period when the public was suffering from high cost of credit in the country. The amendment was seen as timely and a relief by Kenyans as it touched on the high cost of living.

Traditionally, international banking practices hold that interest rate caps have produced undesirable outcomes, most notably, reducing bank competition whilst increasing risk to financial stability. A report published by the Central Bank of Kenya (CBK) in March 2018, highlighted the progress so far regarding the rate caps. The CBK acknowledged that there was an overwhelming increase in demand for credit immediately following the capping of lending rates.