This archive report was first published on 26 November 2019.
On November 7, 2019, the Banking Act was amended, effectively repealing the interest rate caps. This move sparked anxiety among Kenyans, with many fearing a negative turn in interest rates.
However, Central Bank of Kenya (CBK) Governor Patrick Njoroge has sought to demystify these pockets of uncertainty, assuring Kenyans that the banking sector has moved away from exploitative charges of the past.
Speaking on Tuesday, Governor Njoroge stated, "Banks will not be going back to the same old way of the past, the wild west kind of banditry. We have explained on how exactly banks need to be responsible."
The CBK has implemented the Banking Sector Charter of 2018, which aims to open up the pricing of lenders' products and services to public scrutiny. The charter is anchored on four tenets, including credit information sharing, customer centricity, and the disclosure of all credit pricing.
Commercial banks, including KCB, Co-operative Bank, and Stanbic Bank, have assured clients that old rates will be retained in the pricing of new loans. Kenya Bankers Association (KBA) Chairman Joshua Oigara stated, "The fear that we will be unreasonable is unwarranted as we have repriced ourselves in the last three years. The pricing by banks is not something you wake up and roll the dice on."
The CBK has ruled out pegging new interest rates on regulations, seeking to fully free up the credit market. Governor Njoroge stated, "More benefits are bound to come to us when we free up the economy. While I understand the anxiety, deep water would not be synonymous to drowning in spite of some of us holding that fear."
The CBK has also pleaded with bank shareholders to be more accepting of lower returns from invested equity, seeking to end the rout of borrowers' exploitation.
