Some Members of the Kenyan Parliament have unanimously endorsed proposals to set maximum interest rates that commercial banks charge for loans.
In the debate on the Banking Amendment Bill here Thursday, the MPs decried the current high interest rates charged of up to 24 per cent per annum, noting that this should be reduced by half.
The Banking (Amendment) Bill, 2015 seeks to regulate interest rates at no more than four percentage points above the base rate set by the Central Bank of Kenya (CBK).
According to the MPs, the CBK has been unable to control the ever-rising interest rates even with the introduction of the Kenya Bankers Reference Rate.
With seven out of 10 of the most profitable companies in the country being banks, the MPs feel that there is more than what meets the eye in the profits being made by banks, and blame the central bank for failing to rein in on the ever-rising interest rates charged by the banks.
The legislators raised a number of issues that they want addressed, including the awkward questions that banks ask regarding deposits and withdrawals, interest rate paid on deposits as well as disclosure of all charges and terms relating to loans.
This is not the first time the law-makers have discussed the issue and similar bids have previously failed.
Kenyans are however sceptical of the successful passage of the Bill into law with banks having previously fought such attempts through the courts and won in addition to fears that some MPs could be compromised by banks to shoot down the Bill.
If enacted into law, banks’ lending rates would be capped at 15 per cent based on the CBK’s current benchmark rate of 11 per cent. Currently, those borrowing personal unsecured loans are paying up to 25 per cent.
A similar bid by MP Jakoyo Midiwo to cap the bank interest rates flopped in August last year.