Standard Chartered Kenya chief executive Lamin Manjang on October 2 warned that the cap on interest rates is counter-productive and an impediment to Kenya’s economic growth.
In an interview with Reuters, Mr. Manjang appealed to the government to repeal the act in order to improve that country’s credit growth rate.
“The overall credit growth rate is still below five per cent. For the country to realise its developmental goals, the government needs to employ a more sustainable policy. From where I sit, right now the best course of action would be repealing the act,” said Mr. Manjang.
The cap on interest rates came into force in 2016 after Kiambu Town MP Jude Jomo marshaled MPs to make sure that the law was passed. The law requires banks to advance credit to the private sector at no more than 4% of Central Bank of Kenya’s lending rate which is 10.5%.
Mr. Jomo who has now become synonymous with the law accused banks of colluding to give credit to the private sector as what he termed as exorbitant rates.
But Mr. Manjang is of a different view saying that market forces should be the determining factor of the rates at which loans are advanced.
An attempt by the Treasury CS Henry Rotich to repeal the cap in June flopped after MPs s**t down his proposals.
Consequently bank earnings in 2017 plummeted, a situation which was compounded by a prolonged electioneering period and ravaging drought.
“Banks had to revise their strategy after the cap and because of that we’ve had a better financial year in 2018 thus far. The good year is also attributable to cost reduction and automation,” said Mr. Manjang.
StanChart Kenya projects that it will maintain the impressive performance in H2 after its profits grew by a third as compared to last year.