This archive report was first published on 11 November 2019.
Kenya: Interest Rate Cap Repealed, Lenders Free to Set Rates ¶
President Kenyatta signed the Finance Bill 2019 on November 7, 2019, repealing Section 33b of the Banking Act that specifically provided for the capping of interest rates.
The Central Bank of Kenya (CBK) has retained its benchmark lending rate at 9.0 per cent for the sixth straight time since bringing it down in July 30, 2018. This means banks could not charge loan at rates above 13 per cent, a move that was aimed at sparing borrowers higher cost of loans.
However, with the repeal of the interest rate cap, lenders are now free to set their own rates. Banks have started introducing new interest rates on loans, with some charging as high as 30 per cent.
Kenya Bankers Association chairman Joshua Oigara has said lending rates will increase by about three per cent from the current average, meaning it is likely to average 16 per cent.
"The rates are likely to increase by two to three per cent," he said in Nairobi.
President Kenyatta last week launched a new credit facility for Micro, Small and Medium (MSME's) enterprises dubbed Stawi, which will allow MSME's to access unsecured credit of between Sh30,000 ($292.83) and Sh 250,000($2440.27) at an interest rate of 9 per cent per annum.
