Banks will now use their discretion to charge interests on loans after the repeal of the rate cap law.
The law that came into force in 2016 was scrapped last month after it was blamed for stifling private sector growth.
Banks opted to put their money in government securities and institutional borrowers, starving Medium and Small-Scale Enterprises of cash.
Their hands have been untied, but this should not give them carte blanche to bleed borrowers to death through unreasonable and unethical interest rates.
Yesterday, the Central Bank Governor, Patrick Njoroge promised that lenders will not return to “Wild West banditry”. He said banks should be ethical and avoid short-term gains.
We fully agree with Njoroge. While banks are not charitable organisations, bank loans should not lead people to an early grave.
Before the rate cap law, many borrowers ended up paying interests which were way above the principal loan. Many court cases over the interest charged by banks are ongoing.
The country should not go back to this scenario. Loans should offer value for money and not drive borrowers into a debt and death trap.
Failure by banks to operate ethically, online lending apps will continue mushrooming and taking advantage of the void.
Quote of the Day: “Treat people you do business with as if they were a part of your family.”
Kōnosuke Matsushita
The Japanese industrialist, who founded Panasonic, was born on November 27, 1894
