Why are bank interest rates so high in Kenya?

Analysts argue that incensing more banks could lower the interest rates the same way more matatus on given routes stabilise fares. [GRAPH: XN IRAKI]

Kibaki’s reign, particularly the first five years, were characterised by falling interest rates and availability of credit. Banks set up kiosks on the streets to dole loans. It is joked that is why hawkers were chased off the streets. Banks employed teams of sales representatives - mostly young graduates to sell loans. I met one such a sales representative last week.

The interest rates are still high compared with Kibaki’s first five years. The Government has even formed a task force to investigate the causes of high interest rates. Why are rates high? What can we do about them? Economists will quote the law of supply and demand to explain the high interest rates.