Four more commercial banks have offered to lower banking rates by 100 basis points as debate over a new bill passed by MPs to control of lending rates rages on. Family Bank, Bank of Africa, National Bank of Kenya and Bank of Baroda have put out notices for rate cuts later this month, piling pressure on other banks to follow suit.

The banks attribute this to a slash in lending rates following the reduction of the Kenya Banks Reference Rate Benchmark (KBBR) down to 8.90 per cent from 9.87 , but analyst see it as a desperate measure to dissuade President Uhuru Kenyatta, who received the bill today, from signing it into law.

In its notice NBK indicated that its reduced lending on loans denominated in Kenya shillings will take effect on September 1st. The rest of the three lenders will adjust their rates downwards from August 25th, a month after the monetary policy committee (MPC) lowered the bench mark.

Last month, Parliament approved a bill restricting lending rates at 4 percent above the Central Bank benchmark rate but the bill elicited mixed reactions. The Central Bank of Kenya held its benchmark interest rate at 10.5 percent at its July 2016 meeting, saying a rise in inflation is expected following a hike in fuel taxes.

The Kenya Bankers Association, an umbrella body of lenders, and Kenya’s Central Bank have  opposed the  bill, pointing out that such move will force them to stop lending to “high risk borrowers’.

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The association, which represents over 40 banks including last week said its members had agreed to reduce their interest charges by 100 basis points. “We seek to offer practical solutions to the interest rates debate, while still retaining free market principles that are currently enjoyed by the private sector,” said Habil Olaka who called for more dialogue.

The association added that its members had agreed to set aside a combined Ksh30bn ($294m) to improve access to capital for small and medium-sized enterprises at concessionary rates. The offers were quickly rubbished by legislators, as a case of too little too late to the imminent legislation. The legislators accused local banks of cartel-like operations and vowed to lobby for the president to assent to the bill in its current form.

Scaring investors

In their efforts the banks also offered to no longer charge customers who close their accounts in order to encourage them to “shop around” among banks.

Parliament’s bill was backed by various trade unions and by Kenyan opposition leader Raila Odinga, who argued that high interest rates were turning away investors. “High commercial lending rates, often around 18 per cent or more, have stifled businesses and particularly killed upstarts such as youth projects,” Mr Odinga said.

For his part, Mr Kenyatta has said through his spokesman he “remains committed to finding a solution to the high interest rates”.

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