CBK boss revives rate cap law debate with scrapping hint

CBK Governor Patrick Njoroge

Central Bank of Kenya (CBK) Governor Patrick Njoroge has reiterated his opposition to the rate cap law, hinting at its possible scrapping.

Terming the law “detrimental”, the governor said yesterday the private sector had been starved of credit to such an extent that the country’s export trade had been affected since few start-ups can produce enough to export competitively.

“It is true that interest capping is not a solution. Few Small and Medium Enterprises can afford to produce enough for the export market without sufficient credit to cover production costs. We are looking for a solution to the cap law,” said Dr Njoroge at the close of the Kenya Trade Week in Nairobi.

The CBK boss was commenting on the challenges that have seen Kenya’s export trade slacken in the past few years.

Shrinking exports

The country currently exports three times less than it imports while start-ups contribute less to the export trade.

Lack of innovation has also seen 52 per cent of what the country exports shrink to only five products, among them tea and textiles. The lack of innovation has also seen Kenya’s export market shrink due to fewer products in the international market. Currently, 70 per cent of Kenya’s exports go to only 12 countries.

“Innovation needs investment. To invest, we need availability of credit. The cap law is not strengthening us to that end,” said the CBK boss.

Reports had indicated the National Treasury was set to constitute a team of experts to look into the legal and regulatory impact of the rate cap on cost of credit.

But Wednesday, National Treasury Principal Secretary Kamau Thugge told The Standard no such committee had been formed.