CBK to finalise study on cost of loans in one month

The Central Bank of Kenya (CBK) is set to conclude a study on the law capping interest rates and its impact on the economy in the next one month.

The CBK governor Patrick Njoroge made the announcement yesterday amid growing concerns over the slow growth of credit following implementation of the legislation last September.

“We have gathered more data. We want to present it in a definite way. We will put out a first draft hopefully in a month or so,” said Dr Njoroge.

“The underlying concerns that led to the interest rate caps are still concerns that we hold dear,” he added even as he maintained that transparency in pricing of loans by banks remains a critical factor in lowering the cost of credit.

The growth of loans to the private sector fell to 2.1 per cent over the 12 months to May this year, attributed in part “to significant repayments in manufacturing, transport and communication, and developments in the trade sector” with lesser advance of new credit to the sectors.

The government capped lending rates last September at four percentage points above the Central Bank Rate, responding to borrowers’ complaints that the cost of credit was too high and banks had repeatedly failed to lower them.

READ: Relief for borrowers as CBK maintains rate at 10 per cent

Critics have accused banks of engaging in blackmail and economic sabotage to force through amendments to the law.


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