Kenya Court reduces banking rates capitalisation, suspends implementation for a year

Kenya Commercial Bank, one of Kenya's largest banks by customers
Kenya Commercial Bank, one of Kenya's largest banks by customers. 

On Thursday, a Kenyan court ruled that a capitalisation on commercial bank interest rates is unconstitutional, but judges suspended the ruling for 12 months to allow parliament to re-examine the law. 

 Lawmakers captalised interest rates at 4 percentage points above the central bank’s benchmark in 2016, saying they were concerned about high levels. But that has led to a private credit squeeze, as banks say it forced them to cut back on loans to high-risk groups.

 But that has led to a private credit squeeze, as banks say it forced them to cut back on loans to high-risk groups. 

 The ruling said the section of the banking act imposing the capitalisation was unconstitutional because it only punished bankers and not customers for contravening the law. However, the ruling does not mean the rate capitalisation will be lifted immediately. “Implementation is suspended for 12 months,” the central bank said in a tweet. 

 In March 2018, the central bank said the capitalisation had probably cut 2017’s estimated economic growth rate by 0.4 percent because it throttled credit to small and medium businesses.

In June, Finance Minister Henry Rotich proposed repealing the interest rate capitalisation, a move cheered by bankers. But lawmakers rejected that.

Reuters 
https://www.evolutionalblogs.com/p/two-2-3-odds.html

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