There is continued and raging debate on the impact of the interest rate cap on Kenya’s economy. Recently, the discussion has centred on the contribution of this policy to the decline in private sector credit since its introduction in 2016 through amendment to the Banking Act. The Institute supported the interest cap law based on reasons that it protects consumers from high interest rates, increases access to finance and makes loans affordable for economic growth.
Recently, the President in his Memorandum to Parliament gave several reasons for declining to assent to the Finance Bill 2019. He cited unintended effects to the economy such as the reduction of credit to the private sector, decline in economic growth, slowdown of monetary policy transmission to inflation and growth thus weakening Central Bank’s mandate, reduced loan advances by banks and which has led to mushrooming of shylocks and other unregulated lenders in the financial sector.
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