This archive report was first published on 17 October 2019.
On October 17, 2019, President Uhuru Kenyatta rejected the capping of interest rates, a move that has sparked a review of the policy.
The central argument for retaining the rate cap revolves around the failure of banks to set reasonable interest rates and disclose all loan conditions.
Lawmakers are now considering whether to retain or remove the rate cap, with some arguing that it has made it difficult for banks to price the risk of each client.
However, others argue that the rate cap has forced banks to restrict lending to highly profitable and liquid companies and individuals, shutting out micro, small and medium enterprises (MSMEs).
Before making a decision, lawmakers should insist on changes that banks can make to the way they conduct business and treat customers.
This can form the basis on which a review of the rate cap can be done, with conditions set for banks to meet before the existing restrictions on the lending rate are removed.
