Consumers fault court ruling against interest rate capping

The Consumer Federation of Kenya (Cofek) on Monday filed a notice to appeal the ruling that scrapped bank interest rates capping with effect after 12 months.

The lobby group through its Secretary General Stephen Mutoro said the ruling made last week did not specify how the rate capping contravened the constitution.

The Commercial and Admiralty Division declared the interest rate controls illegal last Thursday in a move that is set to open the way for expensive loans.

The court, however, suspended enforcement of the ruling for 12 months to give lawmakers time to amend the legislation that Parliament passed in September 2016.

“The ruling cannot purport to transfer the legislative powers vested on Parliament, under Article 94, to the CBK (Central Bank of Kenya). Our conviction is that the ruling has no legs to stand on. It will form a bad precedent in the statutes. It must not be allowed to stay,” Mr Mutoro said yesterday in a statement indicating the notice of appeal.

The Cofek said it had also requested the National Assembly to discuss the matter and accused the Central Bank of Kenya and the Kenya Bankers Association of ulterior motives that would hurt consumers.

The court’s decision comes amidst a sustained push by the International Monetary Fund for the government to scrap the interest rate controls that were capped at four percent above the Central Bank Rate.

The multilateral lender had in April 2017 said the move stifled credit access for small and micro enterprises.

The Treasury had last April said it would introduce legal amendments before Parliament to abolish the rate cap and address the high cost of credit that has seen banks shun small, micro and medium-sized businesses since December 2016.

Data by the CBK showed that private sector credit growth fell to 4.3 percent in December 2016 compared to more than 17 percent a year earlier.