Faith Mwangi Equity Research Analyst, Financials (East Africa)
Christopher Dielmann Senior Economist
June 13 2019
Kenya: Treasury proposes loan rate cap repeal via Finance Bill
In the budget statement for FY 19/20 released today, Kenya's Treasury Cabinet Secretary Henry Rotich proposed the removal of Section 33 (B) of the Banking Act, which would essentially repeal the loan rate cap entirely. Rotich said that the rate cap had been introduced to reduce the cost of borrowing and increase access to credit, but had not lived up to expectations. Hence, the Treasury noted that the proposed repeal would address the need to enhance access to credit and minimise the adverse impact of the interest rate cap on credit growth.
The High Court ruling still stands. The High Court of Kenya had earlier ruled that the loan rate cap was unconstitutional, but to avoid disruption in the market, it suspended the effect of the ruling for 12 months (until March 2020). This could allow loan yields to remain subject to the limit of 400bps above the central bank rate of 9% (for a maximum rate of 13%) until March 2020, if no additional amendments are passed prior...
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