This archive report was first published on 24 July 2019.
Published on July 24, 2019, a proposed law in Kenya aimed at capping mobile loan interest rates has hit a roadblock after the High Court suspended its implementation.
The Banking (Amendment) Bill, 2019, seeks to cure the ambiguity of the legal provision that introduced a ceiling on interest charged by commercial banks. The proposed law has expanded the meaning of 'loan' to include any 'advance, credit facility, financial guarantee or any other liability' as defined by the Banking Act.
However, the High Court recently suspended the implementation of the proposed law, giving legislators one year to put in place appropriate mechanisms. The court's decision came after a petition by Boniface Oduor on the constitutionality of the provisions of the Banking (Amendment) Act number 25 of 2016, which introduced section 33b into the banking act.
According to Jude Njomo, the sponsor of the Banking (Amendment) Bill, 2019, the amendment will clarify what a credit facility is by replacing the term 'credit facility' with the word 'loan' which is a more suitable and comprehensive term for purposes of section 33B(1).
Loans given by banks have been capped at no more than four percentage points above the Central Bank Rate (CBR) currently at nine per cent. This means that no regulated bank today charges more than 13 per cent. However, mobile loans offered by commercial banks have not been affected by the legislation.
