This archive report was first published on 7 November 2019.
On November 7, 2019, President Uhuru Kenyatta signed the Finance Bill 2019 into law, paving the way for commercial banks to set their own interest rates.
The move comes after a contentious debate in Parliament, where lawmakers initially passed the Bill without amendments to section 33b of the Banking Act. However, President Kenyatta refused to assent to the Bill, recommending instead that Parliament lift the ceiling on lending.
According to a memorandum read out to MPs on October 17, the President expressed his reservations with the interest rate caps introduced in September 2016, citing 'unintended effects that are significant and damaging to our economy.'
Among the highlighted effects included lowered private sector credit and the severed monetary policy transmission by the Central Bank of Kenya (CBK).
Kenya Bankers Association Chairman Joshua Oigara defended the move, stating that banks have repriced themselves in the last three years and that the pricing is not something that can be changed overnight.
Despite the banks' assurances, the move has sparked fears of expensive loans returning to Kenyans, with the interest rate on new loans expected to be higher than the current rate of 13 percent.
