This archive report was first published on 18 October 2019.
On October 18, 2019, President Kenyatta declined to assent to the Finance Bill 2019, citing concerns over the interest rate cap imposed in 2016.
According to the President, the cap has negatively affected private-sector loan growth, as lenders have avoided giving loans to customers deemed as risky, including SMEs.
“The President has not assented to the Bill and has returned it to Parliament for review. The issue is the repeal of interest capping law,” National Assembly Majority Leader Aden Duale told Business Daily.
International Monetary Fund (IMF) has also been pressuring the government to scrap or modify the interest restriction law.
Before the introduction of the capping law in 2016, banks exposed borrowers to high lending rates of up to 25 percent.
With the cap in place, lending rates are capped at four percentage points above Central Bank of Kenya’s benchmark, which currently stands at nine percent, putting the maximum borrowing rate at 13 percent.
