Mr Midiwo’s amendment has forced the Finance Bill to stall in Parliament. File
The Kenya Bankers Association (KBA) yesterday failed to strike a deal with an MP who wants interest rates controlled as a condition for passing the Finance Bill, which is expected in the House next week.
Gem MP Jakoyo Midiwo said he would only accept a concession that will see banks charge not more than 15 per cent on loans.
“We have not reached any settlement on the issue of lending rates. We are still in discussions,” Mr Midiwo said after meeting KBA members Thursday morning.
The Gem MP, whose amendment has forced the Finance Bill to stall in Parliament, said he was yet to hold discussions with Treasury on the issue of capping interest rates charged by banks at four percentage points above the Central Bank Rate (CBR).
He said that if discussion fails, the ultimate decision will lie with Parliament when the Finance Bill is reintroduced next week. “I have no intention of withdrawing it unless a concrete agreement with Treasury and the bankers’ association is reached to lower rates to less than 15 per cent for lending and something between 13 and 14 per cent for deposits,” he said.
Mr Midiwo said MPs have a duty to protect Kenyans from high interest rates charged by banks.
The institutions charge borrowers rates of between 27 and 32 per cent. Interest rates on deposits are below 10 per cent, giving banks huge operating margins.
Treasury has insisted that the amendment should not be allowed as it has “far reaching consequences” which will ultimately affect the economy.
Private sector representatives said that interest rate controls should be avoided, arguing that self regulation by banks and fiscal discipline would bring interest rates down. Last week, acting Finance minister Njeru Githae said he was ready to reintroduce the Bill in the House.
The Bill, which gives the government legal backing to tax Kenyans, was supposed to be enacted into law by December 31.
Failure to put in place the law means that the government is taxing Kenyans illegally.
