Gatundu South MP Moses Kuria, on Monday, proposed a Bill seeking to do away with the banking loan cap for high-risk borrowers.
In a letter to National Assembly Speaker Justin Muturi, Kuria explained that banks had shunned borrowers they termed as high-risk due to the cap on loan rates.
He is, therefore, seeking to increase the loan interest cap by six percentage points above the Central Bank Rate (CBR) which currently stands at four points.
If the bill is adopted, then high-risk borrowers will pay up to 15% interest on loans from the current 13%.
“I wish to introduce an amendment to the Banking Act to introduce a risk negotiation window of up to six per cent above the lending cap for SMEs and unsecured individuals to negotiate pricing based on their risk profile and on a willing buyer, willing seller basis,” stated Kuria in the letter.
He, however, categorically stated that the new rates would only apply to high-risk borrowers but current CBR rate would still apply to low-risk borrowers.
He further explained that the new bill would discourage government borrowing from the local market while driving private sector growth.
“The amendment will go a long way to free credit to the SMEs, discourage government borrowing from the domestic market, drive private sector growth and spur fresh economic activity and growth,” continued Kuria.
In 2016, the state introduced a Banking Act that capped loans at 14%.
This cap, however, reportedly led to segregation of customers by banks shunning most high-risk borrowers over poor returns.
