Uhuru Makes U-Turn in Directive That Will Hurt Kenyans

President Uhuru Kenyatta made a U-turn and issued a directive that could potentially have an enormous effect on Kenyans and the private-sector.

On Thursday, October 16, the Business Daily reported that Kenyatta had declined to approve the Financial Bill 2019 and asked legislators to scrap commercial lending rate caps.

In 2016, Kenyatta ascended into law the Finacial Bill 2016 which went on to control interest rates by capping lending rates at 4%. This meant that banks were restricted on the amount of interest to generate from a loan an individual borrowed.

“Kenyatta has not assented to the Bill and has returned it to Parliament for review. The issue is the repeal of interest capping law,” National Assembly Majority Leader Aden Duale told the publication on Wednesday, October 16. 

Should MPs agree with Kenyatta and remove the cap, borrowers will be left begging at the feet of banks, who will have massive freedom to declare their interest rate, depending on the risk.

Banks currently prefer offering loans to the government instead of the youth and private sector investors, as they consider the youth a flight risk and defaulters.

This directive will be a major win for banks who Kenyatta is in agreement with, that the interest carp is hurting the economy.

However, Nicholas Gachara, a private financial adviser at Tax and Accounting, differed with the President and informed Kenyans.co.ke that the move will burden the Kenyan youth and affect the private sector. 

"First of all, you cannot force the banks to give out loans as they have a limit. This directive will impose a challenge on borrowers to invest unless they turn to alternatives such as Saccos and Mobile loans (SMEs) which are very expensive.

"What I request Kenyatta to do is to reject that bill but increase the interest rate cap from 4% to 6%. This will give the banks an appetite to lend and the borrowers will benefit," Gachara advised.