Treasury eyes credit management bill in rate cap scrap bid
The National Treasury has rubbished the remarks from members of the national assembly who threatened to collapse any motion calling for the repeal of rate capping on commercial banks by the finance ministry.
The dismissal by the National Treasury come in the wake of a resurgence of the debate around interest caps that put legislators and financial institutions at logger heads with the ministry.
In response to its criticizers, the National Treasury has outlined plans to table a new bill in the National Assembly with a view of easing credit access by individuals and Small and Medium Enterprises (SMES)
Treasury Cabinet Secretary Henry Rotich on Friday argued that there was more to the current stalemate than interest caps alone.
“This bill is supposed to address the root cause of the problem. Caps are just secondary solutions. The primary solution is to ask why interest rates are high and what are the measures we put in place to ensure interest rates remain sustainably low,” Mr Rotich said.
Among proposed interventions to curbing the high interest rates by commercial banks includes the formation of the Kenya Mortgage Refinancing Company that serves the purpose of guaranteeing long term access to mortgage credit by financiers with a view of bolstering private sector development.
Mr Rotich said such interventions would enable commercial banks to lend to customers at cheaper rates.
“If banks remain stuck at reviewing their interest rates upwards, soon you will not see any lending. Addressing the root cause of the problem is therefore the solution,” he added.
Earlier in the year, the International Monetary Fund (IMF) recommended that Kenya scrap the interest rate cap for commercial bank’s lending, for Kenya to continue getting access to the Sh150 billion emergency credit facility.
Legislators have however accused the treasury of being arm twisted with the push to scrap the rate cap at the expense of borrowers.