Kenya court axes banking rates cap, suspends implementation for a year

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NAIROBI – A Kenyan court ruled on Thursday that a cap on commercial bank interest rates is unconstitutional, but judges suspended the ruling for 12 months to allow parliament to re-examine the law.

Lawmakers capped interest rates at 4 percentage points above the central bank’s benchmark in 2016, saying they were concerned about high levels. But that has led to a private credit squeeze, as banks say it forced them to cut back on loans to high-risk groups.[nL8N1VL2X4]

The ruling said the section of the banking act imposing the cap was unconstitutional because it only punished bankers and not customers for contravening the law.

However, the ruling does not mean the rate cap will be lifted immediately. “Implementation is suspended for 12 months,” the central bank said in a tweet.

In March 2018, the central bank said the cap had probably cut 2017’s estimated economic growth rate by 0.4 percent because it throttled credit to small and medium businesses.[nL8N1R32H3]

In June, Finance Minister Henry Rotich proposed repealing the interest rate cap, a move cheered by bankers.

But lawmakers rejected that.

Reporting George Obulutsa and Humphrey Malalo; Writing by Katharine Houreld; Editing by Gareth Jones and Andrew Cawthorne (Reuters)

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

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