This archive report was first published on 7 November 2019.
On Thursday, November 7, 2019, President Uhuru Kenyatta signed the Finance Bill 2019 into law at State House, Nairobi. This move effectively scraps the interest rate cap on bank loans, a provision that was introduced in 2016 to regulate the high cost of credit in Kenya.
The Finance Bill 2019 repeals section 33(b) of the Banking Act, which provided for the capping of bank interest rates. This change is expected to enhance access to credit for the private sector, particularly small and medium-sized enterprises (MSMEs), as well as cut out exploitative shylocks and other unregulated lenders.
According to a tweet by State House, the repeal of section 33(b) is expected to 'enhance access to credit by the private sector especially the Micro, Small and Medium Enterprises (MSME's) as well as cut out exploitative shylocks and other unregulated lenders.'
Following the signing of the bill, banks will now be free to price loans depending on their own risk assessment. This move was welcomed by the president, treasury, and the Central Bank of Kenya (CBK), who argued that the interest rate cap was hurting the country's economy.
It is worth noting that the interest capping law became operational on Wednesday, September 14, 2016, following concerns raised by the public on the high cost of credit in Kenya. However, critics argued that it did not achieve its intended purpose, calling for its amendment.
