The era of expensive loans is back after National Assembly’s Finance and National Planning Committee agreed to support President Uhuru Kenyatta’s recommendation to repeal interest rate caps.
President Kenyatta’s recommendation is expected to be debated by the National Assembly either on Wednesday or Thursday.
Last week, the President declined to approve the Finance Bill, 2019, and asked MPs to scrap commercial lending rate caps.
The lending rate caps were imposed in 2016 at four percentage points above the benchmark Central Bank rate in a move to shield Kenyans against exploitation by the banking industry through high loan costs.
“The committee settled for the second option where they agreed to adopt the President’s reservations to Clause 45 and made a further amendment to save the rights of existing borrowers,” the team’s report read.
Despite agreeing with President Kenyatta’s reservations, the committee chaired by Joseph Limo said that there was still need to protect borrowers from being affected by the rate cap repeal until they clear their existing loans.
In its report to the house, the committee proposed to introduce a new amendment that states that any agreement or arrangement to borrow or lend which was made or entered into will continue to be in force on such terms including interest rates and for the duration specified in the agreement or arrangement.
