How new proposal by CBK will ease pressure on borrower

Kenya’s Central Bank of Kenya (CBK) said Monday that it will draft a monetary policy to make the banking sector more customer friendly, while at the same time admitting the caps which came into force in 2016 had ‘destroyed part of the economy.”

The High Court on March 14, 2019 declared the Banking (Amendment) Act 2016, which capped interest rates unconstitutional – whose effects, the banking regulator effects had both affected the monetary policy’s effectiveness as well as credit flow to micro, small and medium enterprises (MSMEs).

CBK governor Patrick Njoroge said that the Central Bank had already commenced talks with local banks to ensure that they don’t introduce punitive measures in bid to recover money lost because of interest rates capping.

If such plans see the light of the day, credit access for small and micro enterprises would be more available as well as lower the cost of doing business by a bigger margin. The caps have also been opposed by The International Monetary Fund (IMF) which continues to pile pressure on Kenya to remove interest rate controls maintaining they are harming the economy.

Private sector credit growth fell to 4.3 per cent in December 2016 compared to more than 17 per cent a year earlier.