This archive report was first published on 5 November 2019.
On Tuesday, a chaotic session at the National Assembly saw MPs fail to block President Uhuru Kenyatta's decision to reject the interest rate cap in the Finance Bill, 2019. The move was made on November 5, 2019, as reported in the article published on this date.
With only 161 members present, the required two-thirds majority of 233 members needed to veto the President's decision was not met. This means that an amendment to the law can only be introduced in the house after six months.
Temporary Deputy Speaker, Laikipia West MP Patrick Mariru, was forced to preside over the session while standing as MPs opposed to the scrapping of the cap became unruly.
The National Assembly Committee on Finance and Planning had adopted the President's recommendations, which give banks the leeway to set interest rates as they please.
President Kenyatta had returned the Finance Bill, 2019 to parliament two weeks ago, recommending that MPs remove the rate cap provision, stating that the law had had a negative impact on the economy.
The law, passed in 2016, caps interest loans at 4 points above the Central Bank of Kenya (CBK) base lending rate, which stands at 9% at the moment. This has led to banks lending to low-risk business entities and shunning Small and Medium Enterprises (SMEs).
SMEs, deemed to be high-risk, have been forced to borrow from Microfinance institutions at even higher rates.
