Banks and other financial institutions have been spared from a law that would have compelled them to set aside a minimum 10 per cent of their loan portfolios for lending to small and medium scale enterprises.
Jude Njomo, the architect of the interest rate capping law, withdrew an amendment to the Finance Bill after being persuaded by a number of MPs, including former finance minister Amos Kimunya.
“This amendment would have suffered the fate of a court process by people who believe it was not subjected to public participation.
“Secondly, the banks themselves have offered to give 10 per cent of loan portfolio to SMEs. We will put regulations on this after we come up with substantive amendment. I therefore withdraw the amendment,” Mr Njomo said
A majority of MPs had supported the proposed amendment but were disappointed when Mr Njomo dropped it.
Mr Njomo said the proposal to set aside 10 per cent is meant to secure credit for SMEs to qualify for the loans.
“However, I have been approached by Kipipiri MP Amos Kimunya and Charles Kilonzo (Yatta) who have convinced me to withdraw my amendment on grounds that there are banks without SME lending window.
“The Treasury said there is need for freedom of banks to do business and the amendment will interfere with the spirit of liberalisation. But this is important because we must protect wananchi to access these loans,” Mr Njomo said.
Sending wrong signals
Minority Leader John Mbadi persuaded Mr Njomo to withdraw the amendment saying it would send wrong signals to investors that Kenya is overregulating the banking sector.
“This proposal is not thought out at the moment,” Mr Mbadi said.
Junet Mohamed supported Mr Mbadi, saying that no study has been undertaken to ascertain the amount of money that banks have set aside for SMEs
“May be banks are setting up to 40 per cent but we want to curtail it at 10 per cent. Let us do a proper study before we legislate it,” Mr Mohamed said.
But Ronald Tonui, the MP for Bomet, supported the proposal saying the amendment will help small business access funds from banks.
“This will ensure that SMEs access credit to expand their business, grow the economy and jobs. Let us not allow lending to go to large private sector investors at the detriment of our youth, women and small traders,” Mr Tonui said.
“This country needs to grow and it can only develop if banks lends some percentage of loans to small and medium enterprises,” John Waluke (Siririsia) said
Tinderet MP Julius Melly said the amendment will ensure that money is available to the small and medium enterprises.
“This amendment will make banks to give 10 per cent of its lending to SMEs and this will spur economic growth,” Mr Melly, who chairs the Education Committee, said.
Boost for traders
Joseph Oyula, the MP for Butula said rural populations depend on table banking to do their business adding that the setting aside of 10 per cent of loan portfolios to SMEs will be a boost to small traders.
“Banks should actively look for small and micro enterprises to lend money to instead of lending to big enterprises alone,” Gladys Wanga said.