Kenyan President Uhuru Kenyatta has demanded that lawmakers remove a cap on commercial lending rates, and refused to approve the 2019/20 budget unless the limit is lifted.
This was shown by a document sent to parliament from the presidency on Thursday.
The decision was the latest in a running dispute over the rates cap, which the government and banking officials say is debilitating to the economy as it delays lending.
A request by the Treasury to remove the cap was rejected by lawmakers last month, saying lenders had not proven they could be trusted to lower rates without pressure.
The move was the second attempt by the government to repeal the cap after it was rejected last year by lawmakers.
The President said in the note to parliament that the capping of interest rates has not addressed the intended objective particularly in expanding credit access. In the opinion of government officials and bank executives;
“The cap has cut private sector credit growth as commercial banks cut off millions of low-income customers deemed too risky to lend to,”
According to Kenyatta,
“It has also had a knock-on effect on the real economy as credit-starved businesses lay off workers and real estate developers find it hard to sell homes to a credit-short market,”
“Loansharks and other unregulated lenders have seized advantage of the gap created by the cap, charging desperate borrowers exorbitant rates,”
The parliament’s majority leader, Mr Aden Duale, said lawmakers have the option of removing the cap from the bill or overruling the president if two-thirds of the 349 members vote to override his position.
He said the house will deal with the matter within the next two weeks and will make a decision.