This archive report was first published on 7 November 2019.
On November 7, 2019, President Uhuru Kenyatta signed the Finance Bill 2019 into law, marking a significant shift in Kenya's banking landscape.
The new law repeals section 33B of the Banking Act, which had capped commercial lending rates at 4% above the Central Bank of Kenya's base lending rate since September 2016.
Proponents of the repeal argue that it will enhance access to credit for the private sector, particularly Micro, Small and Medium Enterprises (MSMEs), and reduce the influence of exploitative lenders.
As part of the government's efforts to support affordable housing under the Big 4 Agenda, the Finance Act 2019 exempts the National Housing Development Fund from income tax.
However, critics of the interest rate cap argue that its introduction in 2016 slowed down private sector credit and led to a decline in profitability for small banks.
They also claim that the rate cap hindered the Central Bank of Kenya's ability to use the benchmark Central Bank Rate as a tool to stimulate economic growth.
Notably, MPs managed to amend the Finance Bill 2019 to shield existing loans from higher interest rates.
The new law also introduces a tax on income raised from the digital marketplace, aimed at ensuring equity in taxation.
