President Uhuru Kenyatta yet to see Bill capping lending rates

A proposed law to regulate bank interest rates has not been presented to the President.

This emerged yesterday even as borrowers anxiously wait to see if the burden of high cost of loans will be lifted off their backs.

The Standard has established that Parliament was yet to submit to President Uhuru Kenyatta the Banking (Amendment) Bill 2015, which was unanimously passed by MPs on July 29.

Yesterday, lawmakers stepped up lobbying for the President to approve the proposed law, a day after the professional body for accountants supported the proposed cap and contradicted arguments against the controls by commercial banks.

By yesterday evening, the Bill, now being referred to in the corridors of Parliament as the ‘Jude Njomo Bill’ after its sponsor, was still lying at the National Assembly Clerk’s office, almost a week after State House said the President will make a decision ‘later in the week’.

Speaker of the National Assembly Justin Muturi confirmed the Bill had not been forwarded to the President for assent.

“It has not been forwarded. We will possibly do it next week,” said the Speaker.

Clerk of the National Assembly Justin Bundi also said the Bill was within the House awaiting onward transmission to the President’s desk.

“We are still in the process of forwarding the Bill. We just received it from the Government Printer. Once the Speaker has signed it, we will forward it to the President. As we speak, even the President does not know the stage where the Bill is,” said Mr Bundi.

If the Head of State assents to the Bill, lending rates in the country would be capped at 14.5 per cent based on the current Central Bank Rate (CBR) of 10.5 per cent.

Depositors will also enjoy up to 70 per cent interest rate on their deposits, with bank executives who defy these provisions risking jail terms of up to five years.

On Sunday, State House spokesperson Manoah Esipisu said the President was seized of the proposed legislation and was expected to pronounce his decision this week.

Surprising turn

“In regard to the Bill on the proposed cap on interest rates that was passed by Parliament, President Kenyatta is applying his mind and will pronounce himself later in the week,” said Mr Esipisu.

But in a surprising turn of events, it emerged that the Bill, seen to offer hope to thousands of Kenyans reeling under the weight of expensive loans, has not reached the President’s desk even as banks engage in a charm offensive to win over critics of the country’s interest rates regime.

The President has 14 days within which to sign the Bill into law or send it back to Parliament with a memorandum underlining his reasons for rejecting it.

The countdown cannot, however, begin until the Bill lands on the President’s desk. MPs can veto a decision to reject the Bill by raising a two-thirds majority.

The banks this week offered to set aside Sh30 billion in ‘friendly’ loans for small and medium scale enterprises (SMEs) in the country.

The banks sought to rally the support of Central Bank of Kenya Governor Patrick Njoroge through a Memorandum of Understanding that promised to bring down interest rates to below 14.5 per cent within a year.

But MPs backing the Bill yesterday interpreted the banks’ offer as a clever way of circumventing the proposed interest rates law. They also cautioned the CBK boss against “falling prey to banks’ machinations”.

“We are wondering whether this is a genuine offer or a knee-jerk reaction to try to persuade the President not to sign the Bill. Twenty years ago, the banks made similar proposals and up to now, this has not been done. Unless there is legislation, we will not take their proposals as the gospel truth,” said Njomo, the Kiambu Town MP who led five other MPs in a Press conference at Parliament Buildings to dismiss the banks.

“As of Tuesday, the Bill was somewhere between the National Assembly and the Attorney General’s office. I doubt if it has reached the President. But there is enough time to consider the proposals,” he said.

“It is very ironical for the banks to say they want to give Sh30 billion at friendly rates. That is a concession that they have been charging unfriendly rates. Stop extorting Kenyans and accept that the law we intend to introduce is good for Kenyans. We urge the President to consider signing the Bill as soon as possible,” said Abdikadir Aden (Balambala).

Kareke Mbiuki (Mara) reminded the President that low interest rates were part of the Jubilee government manifesto.

“Let the President listen to the cries of Kenyans and not a few cartels who are only intent on fleecing Kenyans. When we as Jubilee were out there campaigning, low interest rates were part of our agenda. Now you have the Bill before you, and if you sign it, Kenyans are going to celebrate the Jubilee government even more,” said Mr Mbiuki.

“What we saw from the banks is a public relations exercise to mislead the President and intimidate Kenyans. If it is being done in good faith, why now? They should have done it before we passed the legislation in Parliament. They are doing it in bad faith,” added Kimani Ichung’wa (Kikuyu).

Geoffrey Odanga (Matayos) and Victor Munyaka (Machakos Town) also asked the President to assent to the Bill.

“As Kenyans, we are waiting for the President to assent to the Bill. Banks have become too capitalistic in nature and have turned Kenyans into paupers,” said Odanga.

The MPs said the Sh30 billion offered to SMEs is only one per cent of the banks’ loan portfolio and nothing less than 20 per cent will be acceptable.