Kiambu Member of Parliament (MP) Jude Njomo is adamant that the interest rate cap will not be repealed despite Treasury Cabinet Secretary’s (CS) Henry Rotich proposal to have it upped to 24 per cent.
While presenting the country’s proposed budget for the 2019/20 financial year last week, CS Rotich proposed to have the interest rate cap, which was introduced in September 2016, revoked. The cap confines loaning rates to four percentage points above the Central Bank’s rate which stands at nine per cent and it was introduced with the intention of protecting consumers from high interest rates charged by banks while increasing loans access to local businesses.
Despite being introduced to make loans more accessible for consumers, the cap has made traditional banks shy away from offering loans to small businesses who they viewed as being risky borrowers capable of defaulting on loans. The Treasury CS is however insistent that repealing the cap will help address the aforementioned issue.
According to a news report by Reuters, Mr. Njomo, who tabled the interest rate cap proposal to parliament before it was turned into law, revealed that the Treasury will likely fail in its quest to have the interest rate cap repealed just like in 2018.
“These guys don’t want to accept the reality, so they keep on pushing. The reality is that the capping of interest rates is here to stay. The law is changed by people who listen to wananchi. That amendment will not see the light of day,” Mr. Njomo told Reuters.
Reuters similarly reports that Kikuyu MP and Chairman of the Parliamentary Budget Committee Kimani Ichung’wah, also shares the same sentiments as his Kiambu counterpart.
“The government has a responsibility to protect borrowers,” the Kikuyu MP told Reuters.