Gem MP Elisha Odhiambo has rubbished calls by banks to scrap the cap on the interest rate on bank loans.
Odhiambo said the law that caps the interest rate at 14 per cent should not be interfered with as it has helped millions of Kenyans who have for decades been fleeced by the banks.
“My orientation is that looking at two weeks ago, all the banks made monumental profits. So they cannot say that capping interest rate has made them make loses,” he said.
Several financial institutions and experts have called for the review of the law, arguing that the capping of the interest rate was hurting the economy.
A report released by the Central Bank in March this year showed that the law had ‘adverse effects’ on the economy as opposed to its intended purpose of lowering the cost of credit and increasing access.
The report showed that small borrowers were being turned away by large banks due to an increase in declining loan accounts and more lending to government and large corporates firms.
But the legislator reiterated that the law, which was introduced in 2016, has helped millions of small and medium business owners and the ordinary Kenyans who were previously charged as high as 26 per cent by the banks.
“It is important that CBK helps customers who are being fleeced by banks. And for prudent management, banks should adhere to the act,” he said.
All the top three banks in the country – Equity, Kenya Commercial Bank and Co-operative Bank announced huge profits in the first six months of the year despite the rate cap.
KCB posted the highest profit – 18 per cent growth in net profit to Sh12.1 billion. It was followed by Equity whose net profit rose by Sh17 per cent to9.4 billion. Coop Bank’s profit rose by Sh7.6 per cent an equivalent of Sh7.1 billion.
Despite the huge profits, Odhiambo lamented that not a single bank has engaged on a serious Corporate Social Responsibility project to help Kenyans.
The lawmaker also called on the Treasury CS Henry Rotich to postpone the implementation of the proposed 16 per cent Value Added Tax on petroleum products.
“Majority of Kenyans are going through a difficult economic period and charging petroleum products will mean that the cost of food will go up. The cost of travelling will go up and life will become more difficult,” Odhiambo said.
He said that the CS should also address, in the Finance Bill expected in Parliament next week, the question of the fluctuating power tariffs that most Kenyans have complained about.
He proposed that a commercial tariff should be enforced through the Energy Regularity Commission.
Read: