Court asked to stop govt from releasing money to banks

Evelyn Kwamboka

A dispute on the decision by banks to double interest rates on the government’s Small and Medium Enterprise fund has now moved to court.

A body formed by the Finance Ministry to monitor and evaluate the distribution of Sh4.8 billion wants the High Court in Nairobi to stop the State from releasing any money to three banks, pending hearing and determination of its case.

On Thursday Justice David Majanja certified the case as urgent and ordered lawyers from Kituo cha Sheria, who are representing the body, to serve Finance Minister Njeru Githae and Attorney General Githu Muigai, with the suit papers.

He said the case be mentioned on February 14 for the court to give further directions.

The Finance Ministry set aside the Sh4.8 billion for the benefit and use of the informal sector within two periods. It set the periods as 2010/2011 (Sh3.8 billion) and 2011/2012 financial year (Sh1 billion).

In the certificate of urgency application, the National Association for the Financial Inclusion of the Informal Sector (NAFIIS), the government has released Sh900 million to Equity, K-Rep and Cooperative banks, each receiving Sh300 million for the informal sector.

NAFIIS claims Treasury suddenly closed down its liaison office without any reason and the banks increased their interest rates from eight percent to 16 percent on money advanced to members of the informal sector.

Some of those in the informal sector have been borrowing Sh5,000 and repay with an interest rate of eight per cent for a period of six months.

The body wants the court to issue interim orders stopping the government from releasing the money to banks, pending hearing and determination of its case.

It also wants the court to direct the Finance minister to reconstitute the liaison office.

In an affidavit filed in court NAFIIS officer, Mr Nelson Nganga, the body is unable to educate the public and members of the informal sector on what is going on as far as the fund is concerned.