HFC, the banking arm of HF Group, and Chase Bank are the latest lenders to announce planned reduction in interest rates by up to a percentage point against the backdrop of a controversial bid to control loan rates.
“Effective August 25, HFC will lower its interest rates in line with the 0.97 per cent reduction of Kenya Bank’s Reference Rate (KBRR) by the Central Bank of Kenya (CBK),” said HFC in a public notice yesterday.
Chase Bank, which is under receivership, also made a similar announcement.
Seven banks have announced cuts in their lending rates. They include National Bank of Kenya, Family Bank, Bank of Baroda and Bank of Africa. Others are Commercial Bank of Africa, StanChart and I&M Bank.
The decision by a section of lenders to extend the rate cuts to customers comes on the back of mounting pressure on President Uhuru Kenyatta to assent to law the Bill capping lending rates.
On Sunday, Council of Governors chairman Peter Munya urged the president to sign the Banking Act (Amendment) Bill 2015 into law to shield Kenyans from high loan rates.
Exploitation by commercial banks
“Kenyans have suffered for long from exploitation by commercial banks, which are charging exorbitant interest rates,” Mr Munya said at Ncuui Church in Muthara, Meru where he attended a fundraiser.
The Treasury and the CBK have voiced opposition against the caps.
Last Friday, Treasury secretary Henry Rotich called for “[a solution which] relies on the root cause of why interest rates are high not second best solutions like controlling interest rates.”
The CBK governor Patrick Njoroge has also called for “a safer path … that assures the population a larger share in the benefits of a vibrant financial sector and also allows banks to continue developing the sector.”
The advice by the two technocrats has heightened the stakes for the president ahead of his much-awaited decision.
On Sunday State House spokesman Manoah Esipisu said the Mr Kenyatta was keenly studying all the sentiments from the raging debate to make a considered decision.
The Institute of Certified Public Accountants of Kenya (ICPAK) became the first professional body to endorse the Bill, arguing if adopted it will provide a mechanism for regulation to benefit borrowers.
“Argentina, France, Zambia, Canada, Germany and a host of countries within the European Union have successfully resorted to such measures to protect their citizenry from exploitation. Contrary to the sentiments expressed against this policy reform, the banking sectors of [the] majority of these countries are considerably more vibrant and efficient,” said the ICPAK.
Bankers have however urged Mr Kenyatta to reject the Bill, arguing that it will hit small borrowers the hardest.