Banks call on Uhuru to dismiss Bill controlling interest rates

Bankers have urged President Uhuru Kenyatta to reject the Bill seeking to cap interest rates, arguing that the move will hit small borrowers hardest.

Individuals, small and medium sized enterprises (SMEs) who are presumed to have a higher risk of defaulting will be locked out from accessing credit if the Bill becomes law, the Kenya Bankers Association (KBA) said Thursday.

Parliament Wednesday passed a Bill capping bank interest rates at four per cent above the indicative Central Bank Rate (CBR), leaving the decision to Mr Kenyatta on whether to assent the Bill to law or reject it.

READ: Eyes on Uhuru as MPs pass law capping cost of loans

If Mr Kenyatta endorses the Bill, bank lending rates would be capped at 14.5 per cent based on the current CBR of 10.5 per cent.

That would be significantly different from current average lending rate of 18 per cent, as per Central Bank of Kenya (CBK) data.

Some borrowers are currently paying as high as 24 per cent for short- to medium-term loans.