Kenyan President Uhuru Kenyatta signed into law a bill limiting how much interest banks can charge for loans, despite assertions by top government officials that the legislation would damage access to credit in East Africa’s biggest economy.
Lawmakers in the nation, which eliminated interest rate limits in July 1991, voted for an amendment to the Banking Act that would require lenders to peg credit costs at 400 basis points above the benchmark central bank rate. The law also compels financial institutions to pay interest of a minimum of 70 percent of the so-called CBR on deposits.
“Since receiving this bill, I have consulted widely and it is clear to me from those consultations that Kenyans are disappointed and frustrated with the lack of sensitivity by the financial sector, particularly banks,” Kenyatta said. “These frustrations are centered around the cost of credit and the applicable interest rates on their hard–earned deposits. I share these concerns.”