Interest rates should be kept low to promote investment, spur economic development

(Photo: Courtesy)

The interest rate debate has dominated Kenyan commercial and economic circles in the past few years. Interest rate is the proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.

Interest rates are a critical element to economic activities because they affect the level of macro and micro-economic activities such as GDP, price levels, employment rate, balance of payments, exchange rates, and economic growth. There is a close correlation between interest rates, savings, investment and economic growth.