The Monetary Policy Committee has since March reduced the Central Bank Rate (CBR) — the benchmark rate in the pricing of loans — to nine per cent from 10 per cent.
Equity increased investment in risk-free securities by 37.45 per cent to Sh158.9 billion in six months period ended June, a faster growth than 3.75 per cent year-on-year rise in loans to customers to Sh275.04 billion.
Barclays grew its holding in government securities 62 per cent to Sh93 billion while loans rose eight per cent to Sh176 billion.
Commercial banks say they will continue lending to the government at the expense of businesses and individuals if legislators make good their threat to shoot down the proposed removal of interest caps, bosses of two leading lenders have warned.
Equity Bank #ticker:EQTY chief executive James Mwangi and his Barclays counterpart Jeremy Awori have argued that the one per cent cut in Central Bank of Kenya’s (CBK) benchmark rate has locked more firms and individuals out of the credit market.
Mr Mwangi reckons a focus in government lending will send shock waves among “optimistic” businesses whose financial needs may not be met by small-ticket loans advanced by micro-lenders including mobile lenders.
“What they will be doing is continue marginalising the Kenyans who cannot get bank loans and leave them to borrow from shylocks at about 30 per cent per month, telecoms at five per cent per week or from microfinance institutions that charge them up to 48 per cent,” he said yesterday.
“Basically, they will be throwing Kenyans under the bus.”
The Monetary Policy Committee has since March reduced the Central Bank Rate (CBR) — the benchmark rate in the pricing of loans — to nine per cent from 10 per cent.
Equity increased investment in risk-free securities by 37.45 per cent to Sh158.9 billion in six months period ended June, a faster growth than 3.75 per cent year-on-year rise in loans to customers to Sh275.04 billion.
Barclays #ticker:EQTY grew its holding in government securities 62 per cent to Sh93 billion while loans rose eight per cent to Sh176 billion.
“There reaches a point where you can keep dropping the (CBR) rates, but that doesn’t change the Treasury bills and bonds rates. So you are going to end up with your rate for lending dropping with your treasury bill and bond remaining higher, which incentivises the banks to go for the risk-free lending,” he said.
Treasury secretary Henry Rotich has proposed to repeal section 33B of the Banking (Amendment) Act, 2016, setting the stage for a return to a free market in pricing loans.
But legislators, led by the law’s architect Kiambu MP Jude Njomo, have vowed to shoot down the amendment while lobbies such as the Consumer Federation of Kenya have vowed to resist the move.
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