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Kenyans angered by ruling on interest cap law

In Summary

•Njomo terms the ruling as mockery to the rule of law

•Court gave Parliament 12 months grace period to rethink the cap law

Kiambu Town MP Jude Njomo. Photo/FILE
Kiambu Town MP Jude Njomo. Photo/FILE

Kiambu MP Jude Njomo has dismissed a High Court ruling that declared unconstitutional the law that introduced interest rate controls as mockery to the rule of law.

However, the court did not immediately suspend the law but gave a 12-month window period for Parliament to reconsider provisions.

The legislator who masterminded the Banking Amendment Act, 2016 that capped bank lending rates at four percent above Central Bank Rate (CBR) believes the application was sponsored by respondents in the case.

The petition by Bonface Oduor sought to establish the constitutionality of the provisions of the Banking (Amendment) Act No. 25 of 26, which introduced section 33B into the Banking Act.

He listed Central Bank of Kenya (CBK), Kenya Bankers Association (KBA) Consumer Federation of Kenya (Cofek) and Parliament as respondents.

The lawmaker wondered why CBK and KBA were enjoined in the case as respondents yet they are leading institutions against the capping law.‘’This is mockery to the rule of law.

Who is fooling who? How could the court not figure this out? Banks are sued in a matter they are supporting the petitioner.

This is laughable,’’ Njomo said. He faulted Judges for dismissing the whole Act based on technicality of a small section of it, which he said disregards Article 159 on judicial authority that sates ‘justice shall be administered without undue regard to procedural technicalities.

He wondered why the court in its ruling allowed commercial interests to override public interests. Kenyans yesterday took to twitter and other social media platforms to reprimand High Court for its ruling.

‘’This is crap. Kenya must cease to be a free-for-all exploitative jungle in the name of Capitalism as this is driving poverty to unimaginable levels,’’ social economic commentator Benji Ndolo said on twitter.

Why are banks making huge profits if interest capping is bad? Interests must be regulated to protect borrowers especially those at the bottom of economic pyramid,’’ James Dalo told the Star.

Last year a report showed that KCB, Equity, Cooperative, Standard Chartered and Barclays - the top lenders - raked in Sh56 billion in net profits, Sh6 billion higher than in the same period last year.

Even so bankers have hailed the ruling as fair enough, saying it provides the industry with a good opportunity to re-engage with our stakeholders, including the National Assembly, Central Bank of Kenya and National Treasury.

According to Kenya Bankers Association, the price controls on bank lending has resulted in several unintended consequences, including a reallocation of capital from where it is needed most.‘’Loan Accounts have reduced by more than 1.2 million accounts.

At the same time, the size of loans has increased by 47 percent, an indication that those who already had a bank loan have been able to increase their borrowing,’’ KBA said in a statement sent to the Star.

The lenders’ association added that CBK has developed a Charter encourages self regulation and integrity.