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Capping of interest rates in Kenya wrong remedy for banks excesses

Moses Kuria

Parliament passed the Banking (Amendment) Bill, now famously referred to as the Jude Njomo Bill that seeks to cap interest rates. If the Bill becomes law, the maximum lending rates in our commercial banks will be 4 per cent above the Central Bank Rate (CBR) which currently stands at 10.5, while the minimum deposit rates will be 70 per cent of CBR. In today's world, this would put interest on deposit at 7 per cent and interest on loans at 14.5 per cent.

It is an open and sad fact that borrowing rates in Kenya are among the highest in the world. It is equally true that the spreads between deposit and lending rates are ridiculously wide. Both are indefensible as they are unsustainable. In fact they are unacceptable. Status quo cannot hold. We cannot continue holding aloft our bragging rights as a middle income economy while tears from our borrowers—especially Small and Medium Enterprises (SMEs)—continue to drown our banking halls and banks continue to make super normal profits. On that I concur with my colleague Jude Njomo.

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