NAIROBI (Xinhua) --
Kenyan President Uhuru Kenyatta on Wednesday
urged commercial banks to work closely with the Central Bank of
Kenya (CBK) to provide affordable credit to Kenyans.
concern that interest rates in Kenya had remained higher than in
comparable middle-income economies despite the deepening of
financial markets and the recent introduction of
“Consumers are yet
to benefit from reduced cost of credit. The concerns led to
recent legislation capping commercial bank interest rates,” he
said during an event in Nairobi marking 50 years since the CBK
The commercial banks
have agreed to comply with the new law which seeks to cap
interest rates charged on loans and deposits.
The Kenya Bankers
Association however said the bank interest rate capping law will
reduce the rate of growth of loans.
Amendment Bill 2015 which was signed into law by President
Kenyatta in August effectively limits the interest rates charged
by banks to four percent of the Central Bank Rate (CBR).
With the CBR
currently at 10.5 percent, banks are not allowed to charge
higher than 14.5 percent as interest on credit.
had been on a flexible interest rates regime since their
interest rates vary according to the prevailing market
conditions and thus the expectation that they will be moved to
the new regime of a maximum 14.5 percent once it comes into
Kenyatta said more reforms were necessary in the financial
sector to create a vibrant and competitive financial sector that
drives high savings and supports investment.
banking crises in the 80’s and early 90’s, resulting largely
from weak corporate governance, insider lending, and poor asset
quality and management. The Central Bank played a key role in
coming up with appropriate reforms to address the weaknesses and
foster financial stability,” he added.
The president also
said Kenya’s financial sector was widely recognized for its
leadership in leveraging mobile phone technology. Consequently,
financial inclusion has increased substantially, with access to
formal financial services having grown from 26 percent in 2006
to over 75 percent currently, according to him.
lauded the CBK for the role it played in the country’s
development. “Over the last 50 years the Central Bank of Kenya
has supported the country’s economic growth and poverty
reduction agenda by promoting price stability and fostering a
stable financial system,” he said.