Deputy President William Ruto asks banks to lower lending rates

Deputy President William Ruto has called on lending institutions to lower their interest rates, citing a drop in inflation.

The DP said there should be a commensurate drop in lending rates given the sustained drop in inflation, which Government estimates indicate would come down to about five per cent in December.

He said the Government was forced to re-open its international bond issued in June, which raised $2 billion (Sh180 billion), to borrow an additional $750 million (Sh67 billion) to finance development projects because of high rates in the domestic market.

The Government has finalised negotiations with the banks that would see mortgage rates come down to 10 per cent as from next month, he said.

The mortgage rates currently vary from bank to bank swinging between 15 and 23 per cent.

"We were forced to move to the international market because there we get the finance at 6 per cent, almost half the rate that we could have been charged locally. We have reached a point, and I've told this to the Kenya Bankers Association, where the rate should come down to six or five per cent," said Ruto during the opening of the 18th African Securities Exchange Association (ASEA) in Diani, Kwale County.

He said the Government was justified in pushing for the reduction, saying the inflation rate is expected to drop.

Ruto advised banks to seek other innovative ways to increase the depths of their savings to enable them adjust to market realities. He said this would give Kenyans access to cheaper loans for business.

The Government is also encouraging local companies to seek financing from the Nairobi Security Exchange (NSE) by listing as the move would enable them to get cheaper loans and push the banks rates down, he added.

review position

"The Government has directed the NSE and the Capital Markets Authority to facilitate more private firms to access money through listing at the market. This will enable the firms to get the money to expand their enterprises instead of relying on bank loans," said the DP.

The NSE Chairman Eddy Njoroge said listing would help firms increase transparency and creativity given that it would work hard to pay their customers dividends.

Ruto said: "The Government is still open to discussions on charging Capital Gains Tax at the stock exchange."

The ASEA conference taking place at the Leisure Lodge in Diani has brought together more than 300 delegates from various stock exchange markets across Africa.

Capital markets stakeholders have consistently appealed to the Government to defer the introduction of Capital Gains Tax on capital markets transactions to enable the industry to grow.

Speaking during the conference, Stock Exchange of Mauritius CEO Sunil Benimadhu, also the outgoing ASEA chairperson, said Mauritius has deliberately avoided charging capital gains tax on stock exchange transactions in order to position themselves as an international financial centre.

Ruto said Kenya also aspires to be an international financial centre and would review its position on the tax in the next financial year.

Among other issues to be deliberated on in the two-day workshop is the Government treasury bonds.

"We welcome proposals that there should be dual-listing but the Government prioritises Kenyans first. The issue should be deliberated further and the stock exchange experts will come up with proposals on how best it can be handled," said Ruto.