Treasury Cabinet Secretary (CS) Henry Rotich is in trouble after a section of Members of Parliament (MPs) accused him of working with a ‘cartel’ of banks.
This is after the CS reviewed the interest rates capping act during the reading of the 2018/2019 budget on Thursday.
Led by National Assembly Minority leader John Mbadi, the MPs have regarded the move to eliminate the Central Bank Rate (CBR) dictated maximum lending and minimum deposit rates as “blackmail” by financial institutions that will cause suffering to the public.
“The rates have stabilised and amending it will make the banks run amok and destabilise the market as was the case before,” Mbadi is quoted by the Star.
Following the directive by CS Rotich, Parliament now plans to vet the bid to repeal the one-year-old interest rate cap which saw the legislators openly jeer the proposal during the reading of the Budget.
Kiambu MP Jude Njomo who crafted the interest rate cap law accused the National Treasury and the Central Bank of trying to please ‘a cartel’ of banks denying Kenyans credit to push for the repeal.
“It is wrong for Treasury to do what the banks want and think that the financial institutions will now behave and make credit available,” Njomo quipped.
“We know banks are not lending to SMEs but are now working as cartels on that promise as they did with high-interest rates. We’ll not support the repeal. It’s meant to enrich a few people,” he warned, accusing the CBK of working with banks to frustrate credit access.
On its part, the Consumers Federation of Kenya (Cofek) criticised the proposal asking the MPs to reject the move, “We urge MPs to veto the proposal with the contempt it deserves. The matter is actively in court.”
Gatundu South Member of Parliament (MP) Moses Kuria has in the past, however, opposed the capping of the interest rates arguing that: “History has shown time and time again that once the doors of liberalisation and open markets are opened, trying to close them creates far more destructive and disruptive effects than the problem you would be attempting to solve.”