By David Ndirangu
Lawmakers have vowed to block an attempt to repeal the cap on commercial lending rates; a day after the Kenya National Chamber of Commerce and Industry (KNCCI) backed the proposal.
Jude Njomo, the Member of Parliament who introduced the cap law, said that the capping of interest rates was here to stay.
The law was introduced in September 2016 to limit lending rates to four percentage points above the central bank rate. This was in an attempt to cut the costs of credit, which in turn would boost access to loans.
However in his 2019 budget statement, The Treasury Cabinet Secretary – Henry Rotich stated that the cap was discouraging banks from lending to customers that they considered too risky.
The commerce lobby group argues that repealing the law will boost flow of credit to small businesses and help manufacturers expand production, thus reducing unemployment. This is according to Richard Ngatia, the KNCCI chairman.
Members of Parliament rejected another proposal to remove the cap last year. Jude Njomo claims that the treasury is being obstinate, and is accusing the minister for siding with banks instead of citizens.
The lawmakers are likely to face a challenge this time round, thanks to a directive from High Court in March, which gave them a year to redraft the law as it was not in line with the constitution.