- Oigara said banks were already pricing risk in the rate cap regime and will only continue to do so
- Activities at the Nairobi Securities Exchange also surged, with bak shares hitting the roof.
Banks have assured the public nothing will change once the rate cap is overhauled.
"For customers with higher risk profiles we may see a 2-3 per cent increase," KBA chairman and KCB Group CEO Joshua Oigara said yesterday.
Banks are currently lending at a high of 13 per cent, 400 basis points above the Central Bank Rate (CBR).
Speaking on the sidelines of the official launch of Stawi, a digital lending app to cater to the marginalised small business owners, Oigara said banks were already pricing risk in the rate cap regime and will only continue to do so.
“Banks are ready to lend. So we are going to see more people including SMEs start accessing credit in the industry," he said.
Since the rate cap regime came into effect in September 2016, over a million customers have been unable to access credit, majority being individuals and small business owners as banks as risky borrowers dubbed them.
"We are not going to see a massive change," he said.
Prior to the rate cap regime, Oigara said, when banks were lending at 25 per cent, Treasury bills had an interest of about 21 per cent and inflation was heading into the double digits.
Currently, short-term government debt facilities are going for eight per cent interest, inflation is well within the CBK target meaning any risk that should have been priced already has been, he said.
"As a leader in the industry, we don't see an opportunity to go back to the old behavior of high rates,” Oigara said.
President Uhuru Kenyatta refused to sign the Finance Bill, 2019 earlier this month demanding that lawmakers repeal the rate cap law, which has been blamed for a slowdown in private sector credit growth.
In 2016, the state limited interest rates chargeable on commercial loans at four per cent above the Central Bank benchmark rate, which is currently at nine per cent.
This was aimed at shielding borrowers from exploitative pricing by the banks.
However, it has been established that three downs the line, the law have failed to meet it's intended purpose but rather made credit inaccessible.
MPs have been in a long-standing squabble with banks, executive and International donors to repeal the rate cap law having already rejected attempts by Treasury to push for a repeal of the law twice.
The news of repeal has sparked excitement in the country's economy, with the shilling strengthening against the dollar.
Activities at the Nairobi Securities Exchange also surged, with bak shares hitting the roof. Equity Bank share price rose by 4.93 per cent while KCB Group jumped 5.97 per cent.
Equity Research Report on Kenyan banks by Renaissance Capital indicated that bank stocks are set for a rally, with Co-op Bank shares surging the most and projected to achieve a target price of sh21.40, which is a 36.1per cent.
Equity Bank share is expected to rise 21.4 per cent to hit sh 58.30 while KCB will rise by 17.6 per cent to stand at sh56.50 per share.