The private sector has called on the Central Bank of Kenya (CBK) to lower the cash reserve ratio (CRR) from 5.25 percent to three percent to raise the money held by banks for lending and ease the tight liquidity in the market.
The CRR is the ratio of total domestic and foreign currency deposit liabilities held by commercial banks in CBK-kept reserves.
Kenya National Chamber of Commerce and Industry’s is proposing the regulator lowers the ratio to induce lower interest rates and boost private sector lending, especially among women-led enterprises.
The private sector considers the lending environment tough over the last three years when the loan rate was capped.
This coupled with delayed bill payment by government entities that created a tough operating environment for the businesses.
Chairman Jimnah Mbaru said the reduction of CRR would support businesses and boost State's effort in financing for domestic debt.
“A consideration to lower the rate will reduce the cost of financing its domestic debt, with zero inflation, given the continued adequate rainfall and stability of oil prices,” said Mr Mbaru on Tuesday.