Kenyan Businesses Optimistic on the Chance of Interest Rate Cap Repeal

Businesses in Kenya are responding to the prospect of having the banking interest rates cap scrapped after the President sent a memo to parliament over the interest rate cap.

President Uhuru Kenyatta wants the interest rate caps to be repealed and the economy is responding to his sentiments. Banking shares on the Nairobi Securities Exchange surged to Kshs 21 Bn on the news of the President demanding that parliament repeals the interest rate cap.

Other retail macro businesses are facing challenges with their clients not accessing credit due to the stringent measure put in place by the banks, post interest rate cap.

“Right now the market is a little bit soft. There is a huge amount of opportunity and upside in terms of business in Kenya. It’s just that now the economy is weak, there some systemic challenges some of which might be changing one of them being the interest rate caps. Some of those things have posed challenges in our business,” Greg Jackson the GM, East Africa of Panafrican Equipment Group said.

“The Government spending freeze and challenges of disbursing funds is something that affects. Our sales are to private entities and to some county government,” he said.

Jackson said that they are looking for other ways to shield their business from a sluggish market. PEG is seeking to begin a leasing program with some of its clients.

According to a Kenya Institute for Public Policy Research and Analysis (KIPPRA) report, the effects of the rate cap has had an effect on the Kenyan economy.

“The interest rate cap brought some negative effects on the general economy, with the effects more severe in 2017 than in 2018. However, some recovery has been witnessed in 2018 with increases in growth of credit to the private sector, and general economic growth,” the report said.

It added that “Small borrowers were the most affected due to increased risk mitigation measures which have led to tightening of credit standards by commercial banks. The financial sector is, however, revealing signs of recovery with growth in credit to the private sector in 2018 showing greater improvements compared to 2017.”

Feature Image Courtesy: Loans Kenya Blog