Govt looking to scrap or modify rate cap law: Uhuru

The government could scrap or modify the law limiting bank interest rates, President Uhuru Kenyatta has said.

The President told a meeting in London that the cap should be removed because it cuts small and medium enterprises’ (SMEs) access to credit.

“We have learned our lessons and recognise the limitations of the law. We need to repeal it altogether or modify it to deal with the concerns that have been raised,” said President Kenyatta, speaking at Chatham House in London on Tuesday.

The assertion by the President comes against a backdrop of a study by the Central Bank of Kenya on the impact of interest rate caps on the Kenyan economy.

The study revealed that the law had failed to achieve its intended objective of increasing credit access to small and medium enterprises by limiting the cost of borrowing for businesses and individuals.

The study further said that the number of loans have declined significantly since the coming into force of the Banking Amendment Act in September 2016.

The law sets the maximum lending rate at no more than 4 per cent above the CBK’s base rate, which currently stands at 9.5 per cent.

READ: Size of loans up but small firms ejected from lending market

ALSO READ: Listed banks’ drop in earnings per share linked to rate capping

MORE: Consumer lobby backs MPs against push to amend rate cap law

Inclusivity

At the same time, President Kenyatta said his administration had made progress in creating inclusivity while calling for mainstream politics in the democratic world to be responsive to the needs of the people.

He pointed out his reaching out to Kenya’s opposition leader, Raila Odinga, as a gesture that should be seen in the context of working to deliver for citizens.

“My reaching out to the Hon Raila Odinga and the opposition must be seen in this context and not one of opening a new political front.

"We cannot achieve the social and economic needs of our people in an environment of constant political bickering,” said the President.

He said political competition is an essential component of democracy but all leaders must rise above the noise and focus on the needs of the people.

“That is the difference between the politics of democracy and mature democracies that can rise above competitive electoral politics to issue-based politics that seek the enhancement of people’s lives and the long term peace, stability and prosperity of our nations,” said the President.

Pressing problems

President Kenyatta said that nations must look to reinforce constructive voices that promote non-partisan or bipartisan solutions to pressing problems.

He said democracies cannot flourish where there is lack of security and cited terrorism as one of the biggest threats to democratic nations.

“Our friendship needs to respond to the enemies of democracy, rather than leave the battlefield and retreat behind walls.

"We have won victories together, disrupted and deterred multiple plots that would have killed many of our citizens,” said the President as he outlined areas for cooperation with the UK.

He said Kenya and the UK must continue to work together to defeat terrorist groups that threaten people and countries.

“We must make it harder for the anti-democratic, hate-filled fanatics who are organising against liberty and trying to turn our citizens into hateful, violent extremists,” said the President.

UK support

He called for UK’s support to build stronger initiatives to prevent recruitment into terrorism and to more effectively disengage and rehabilitate foreign terrorist fighters who have defected and returned home.

“We must also act together to equip our people to counter the threats of weaponised information, which is now perhaps the most insidious tool of the new age,” said the President.

The President said Kenyans in the wider diaspora will be able to vote in the 2022 elections since a trial had already been carried out with those in the East African region.