The Consumer Federation of Kenya says it will lead demonstrations to push for the signing of the bill capping bank interest rates, adding it will not take a rejection.
Cofek yesterday said while it does not want to preempt the president's move, he should avoid “all manner of excuses” to reject the Banking (Amendment) Bill 2015. The bill will cap interest rates at 400 basis points above the prevailing 10.5 per cent Central Bank Rate if signed and enforce interest on deposits to 70 per cent of CBR which would come to 7.35 per cent.
Secretary general Stephen Mutoro said rejecting the bill will amount to betrayal since Kenyans have suffered long enough at the hands of banks.
"We will not take a rejection. This issue can be argued legally at the Supreme Court, because while he has the power as the president to reject the bill, as an individual he has conflict of interest since his family is involved in the banking sector," the Cofek boss said yesterday at a press briefing held at the populous Kencom Bus stage in Nairobi..
“His indecisiveness and unprecedented delay in determining the fate of the bill confirms his potential conflict of interest and stranglehold by bankers contrary to the public good he swore to defend."
Uhuru has seven more days before the deadline to sign the bill, which was handed to him on August 15, lapses.
Banks are against the capping of lending rates, warning that this will lead to exclusion of majority of borrowers, working against the intention of the proposed law.
The lenders instead forwarded a proposal to set aside a proportion of their Sh2.2 trillion loan portfolio for lending to the micro, small and medium-sized enterprises instead of interest caps.
“Even if banks set aside reserve fund of whatever magnitude, the cost of the same will be passed onto borrowers in one way or another. This is because commercial banks are not charitable entities,” Mutoro said.
He said capping the rates is the only option left to safeguard consumers since banks have been abusing self-regulation.
“Government must take its rightful space on banking regulation. Banks cannot have discretion of choosing which law suits them,” Mutoro said.
The move has also been faulted by the Central Bank as well as some fund management firms who said it will be counterproductive to borrowers.
Invest management firm Cytonn asked the president not to sign the bill into law, but in return recommend provisions for fundamental and strong consumer protections for the public.
The besieged lenders have recently announced slight rate cuts in a bid to persuade the president not to sign the bill.
State House sources told the Star last week that the president is likely to veto the bill going by his key financial advisers’ opposition on the limits including Central Bank of Kenya governor Patrick Njoroge and Treasury Cabinet secretary Henry Rotich.
Uhuru has been under public, parliamentary and opposition pressure to sign the bill sponsored by Kiambu Town MP Jude Njomo. It was passed on July 27.
The sources said Uhuru will list numerous reasons why the bill should not become law. He is to draw heavily on arguments raised by Njoroge and Rotich.
One reason against signing is that the proposed cap only covers commercial banks, leaving out many Kenyans who borrow from other sources.
The thinking within the executive is that capping fails to cover those borrowing from micro-finance lenders and mobile platforms such as Safaricom’s Mshwari.
“The president also feels we should strike a balance between a majority of Kenyans who cannot borrow from banks and the middle-class using their salaries to secure loans,” another State House source said. Lowering lending rates is one of the electoral pledges made by Jubilee.