The Central Bank’s Monetary Policy Committee yesterday maintained the base lending rate at nine per cent meaning banks will continue lending at 13 per cent.
This is the fourth time the bi-monthly MPC meeting has stayed the Central Bank Rate at nine per cent.
Since the capping of interest rates that took effect on September 14, 2016, CBK maintained the base lending rate at 10 per cent throughout 2017 before reducing it by 0.5 percentage points in March to 9.5 per cent. The rate was further chopped by another 50 basis points in July to the current nine per cent.
Overall year-on-year inflation for October stood at 5.7 per cent, well under the Central Bank target which ranges between 2.5 and 7.5 per cent in December.
A statement released by CBK shows private sector credit grew by 2.4 per cent in the 12 months to December 2018 a marginal decrease compared to 3.0 per cent in November.
According to CBK, this was largely a result of successful recovery efforts and loan repayments.
About a fortnight ago, Gatundu South MP Moses Kuria lodged a fresh bid to have the 2016 Banking (Ammendment) Act reviewed.
In a letter to the National Assembly Speaker Justin Muturi, Kuria proposed the Act be changed to enable SMEs and unsecured individual borrowers negotiate risk-based interest rates above the normal cap.
“Unsecured individual customers should negotiate pricing based on their risk profile and on a willing buyer, willing seller basis,” Kuria said in his letter.
The proposal further proposed for a risk negotiation window to be up to six per cent above the lending cap for SMEs while maintaining the lending cap at four per cent above the CBR rates for low-risk clients.