High interest rates return as President Uhuru signs Finance Bill 2019 into law

Kenya’s President Uhuru Kenyatta on Thursday afternoon signed into law the Finance Bill 2019 after the bid to remove a cap on commercial lending rates was passed in Parliament on Tuesday following a quorum hitch, potentially boosting the flow of credit to the economy and return of expensive credit.

As part of government efforts to support the affordable housing pillar of the Big 4 Agenda, the Finance Act 2019 exempts the National Housing Development Fund from income tax.

As a result high-risk borrowers like individuals and small businesses face an increase in loan rates of up to three percentage points following the removal of the legal cap on commercial lending charges

Present during the signing ceremony were Speaker of the National Assembly Justin Muturi, Head of Public Service Joseph Kinyua, National Treasury CS Ukur Yatani and Attorney General Paul Kihara.

Others were Majority Leader in the National Assembly Aden Duale, National Treasury CAS Nelson Gaichuhie, Treasury PS Dr Julius Muia, Central Bank Governor Patrick Njoroge and Clerk of the National Assembly Michael Sialai among other senior government officials.

There were only 161 lawmakers present at the time of voting on the President’s amendments for removal of the caps, which fell below the threshold of 233 lawmakers required to retain the cap on lending rates.

The removal of the cap has stoked fears that banks could return the lending rates that prevailed ahead of introduction of the law that restricted bank loan charges.

In the amendments to the rate cap legislation, legislators shielded existing loans from higher interest rates once the cap is repealed, meaning that only new loans will be affected by the high interest rates set to follow.