This archive report was first published on 24 July 2019.
Published on July 24, 2019, a proposed law change seeks to impose penalties on borrowers who ignore interest caps in Kenya.
The bill, sponsored by Kiambu Town MP Jude Njomo, aims to entrench legal limits on lending rates and impose fines of up to Sh1 million or a one-year jail term on those who breach the cap.
The current legal regime only punishes banks and their CEOs for breaching the cap, but the proposed law change seeks to make both the bank and the borrower liable.
Mr Njomo, who introduced the cap law in 2016, argued that the penal provision under the current law is discriminatory and only applies to banks and financial institutions.
He said, 'As it stands, the penal provision under subsection (3) is couched in discriminatory terms as it applies only to banks and financial institutions yet the legal obligation is aimed at both the bank/financial institution and the borrower/customer… amendment) is therefore necessary as it seeks to create a penal provision that is not discriminatory.'
The cap, which limits lending rates to 4 percentage points above the central bank rate, was introduced in September 2016 to cut the costs of credit for businesses and private consumers.
However, suspended Finance Minister Henry Rotich proposed repealing the cap in his Budget Speech to Parliament last month, saying it was keeping banks from lending to customers they considered too risky.
