Kenya's Treasury Chief Is Confident Rate Caps Will Be Scrapped

(Bloomberg) -- Kenya's interest-rate caps will be scrapped because lawmakers won't be able to raise enough support in parliament to oppose the president, acting Treasury Secretary Ukur Yatani said.

President Uhuru Kenyatta has rejected a bill that seeks to retain caps on interest rates that commercial banks can charge on loans. Parliament must now either amend the bill to reflect Kenyatta's wishes or vote to push it through.

The widely circulated Daily Nation newspaper has reported that lawmakers will oppose Kenyatta's move to remove the limits. But Yatani said they will not be able raise the mandatory two-thirds majority of votes to shoot down the president's memorandum

The president "wants this removed," he said. "I'm confident that it's going to go through parliament."

Lawmakers in 2016 approved the Banking Act, which limits the amount lenders can charge on loans to 4 percentage points above the central bank rate. While it was intended to improve lending terms for consumers, it has instead made institutions more selective in who they provide money to, cut into banks' profit margins and sent people to borrow from unregulated micro-lenders at higher rates.

The Nairobi High Court annulled the law in March but suspended enforcement of the ruling for a year so lawmakers could review the legislation. A parliamentarian then proposed changes that clarify the extent to which banks can price loans.

"We are now removing our interest caps," Yatani said. "So that we can free up resources, lending to the private sector, which have actually been seriously constrained."

To contact the reporter on this story: Rene Vollgraaff in Johannesburg at rvollgraaff@bloomberg.net

To contact the editors responsible for this story: Benjamin Harvey at bharvey11@bloomberg.net, Sarah McGregor

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