Kenya Banks Commit to Cutting Rates After Lawmakers Threaten Cap

NAIROBI, Kenya, Capital Markets in Africa: Kenyan banks committed to lowering commercial lending rates after lawmakers proposed imposing a limit on how much interest lenders can charge.

Lenders in East Africa’s biggest economy signed a memorandum that sets out measures to boost lending, including allocating 30 billion shillings ($295 million) to small- and medium-sized enterprises and women at concessionary rates, Lamin Manjang, chairman of the Kenya Bankers Association said Wednesday. Banks will also enhance their business models to reduce rates, he told reporters in the capital, Nairobi.

“The memorandum can be monitored and banks can be held accountable,” he said. “It is not a legally binding document, but when you make a commitment to the regulator, it shows commitment.”

Kenyan lawmakers last month passed a bill that proposed setting a cap on commercial lending rates at four percentage points above the benchmark central bank rate. Kenya’s financial authorities have repeatedly asked lenders to reduce their loan charges to stimulate demand for credit.

Commercial lenders extended loans at a weighted average rate of 18.3 percent in May, according to the most recent statistics from the central bank, whose key rate was kept at 10.5 percent at a Monetary Policy Committee meeting on July 25.

Source: Bloomberg Business News