The Law Society of Kenya (LSK) has filed a petition seeking the government to cap interests charged on mobile loans that have been taken up by most Kenyans.
LSK complained that lenders were charging borrowers very high interests and through the in-duplum rule, they would seek to lower the cost. The lawyers added they would seek the amendment of the Consumer Protection Act as provided for in the constitution.
“In all credit agreements, interest shall automatically stop to run when it equals the unpaid principal, and where the accrued interest or a part thereof is paid, it shall start to run again but only until it is again as high as the unpaid principal,” stated LSK president Allan Gichuhi.
[caption caption="Allan Gichuhi, Law Society of Kenya president via Facebook"]
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The Society noted that creditors were charging a five percent interest per month to lenders which was hurting the uninformed citizen. They argued that the Consumer Protection Act did not adequately cover borrowers from exploitative creditors.
“These provisions shall, for the avoidance of doubt, apply equally to mortgage service providers and mobile lending,” highlighted Allan.
If the move by LSK is actualized, it would mean that the interest paid would stop rising if the outstanding debt becomes equal to the interest. This would see Kenyans pay lower charges especially if one has taken a longer period to repay the loan.
In 2016, Kenya capped the interest rates to as low as four percent under a new directive by the Central Bank of Kenya (CBK). The aim was to ensure that small and medium-sized businesses got access to loans to further their ventures at affordable rates.
However, in January 2018, CBK governor Patrick Njoroge moved to appeal the new directive stating that the economy was suffering.
“So far the interest rate caps have been acting as a break to the economy. The economy is being held back by this. This is something that we need to bring to the fore and deal with so as to support rather than inhibit economic dynamism,” he observed.
President Uhuru, in April, also shared the same sentiments asserting the government would seek to repeal the low interest rates.
“We recognise there is a need to repeal it altogether or modify it to deal with some of the issues and the concerns that have been raised, especially from the financial sector,” he said.
[caption caption="President Uhuru addressing a past parliamentary session via Facebook"]
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