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Oigara backs plan to review law capping interest rates

KCB Group chief executive Joshua Oigara. FILE PHOTO | NMG
KCB Group chief executive Joshua Oigara. FILE PHOTO | NMG 

KCB Group #ticker:KCB chief executive Joshua Oigara has voiced the bank’s support for a review of the interest rate capping law saying it is stifling credit flow and economic growth.

Mr Oigara, who was speaking when announcing KCB’s Sh19.7 billion full-year net profit for 2017, suggested sector-specific lending controls as opposed to the present blanket cap.

His call for a review of the 17-month-old law echoes the sentiments by his fellow bankers, the International Monetary Fund (IMF) and Finance secretary Henry Rotich.

“Credit growth has been a big challenge for us. We are a proponent of the review of the rate cap. The flow of credit should be controlled by market forces,” said Mr Oigara.

“We are willing to give up some sector limits. For instance, mortgage rates to students straight after campus can be capped at certain levels. This model works in other markets. It can work here too.”

KCB’s interest income from loans and advances last year dipped by Sh39 million despite its loan book growing 10 per cent growth to close the year at Sh422.7 billion.

Parliament in October 2016 approved a law that capped interest charged on loans at not more than 4 per cent of the Central Bank rate while deposits were capped at 70 per cent.

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