Banks should increase lending to businesses

Commercial banks must stop trying to manipulate stakeholders to have interest rate capping laws repealed without demonstrating that they have reformed. The banking lobby, Kenya Bankers Association, has been quick to attribute the decline in profits reported by most banks in recent weeks to this law. The lobby argues that only the unconditional repeal of this law will increase credit flows to the private sector.

We reject this argument. For many months, banks have downplayed the relief that the interest rate capping law has brought to millions of individual borrowers and businesses. Instead, they have demanded to be allowed to operate in much the same way as before when their cartel-like behaviour determined lending rates.