Banks will now be at liberty to set their own interest rates after MPs failed to overturn President Uhuru Kenyatta‘s reservations in the Finance Bill, 2019.
According to Daily Nation, the MPs were unable to raise the required quorum to retain interest caps.
Only 160 MPs were present out of the required 233 votes needed to retain the caps in a bill introduced by Kiambu MP Jude Njomo.
President Uhuru Kenyatta declined to accent to the Finance Bill, 2019 on October 17, after MPs moved to retain interest caps introduced in September 2016.
The head of state had argued that the caps ended up causing “unintended effects that are significant and damaging to our economy.”
The 2016 legislation amended Section 33B of the Banking Act to cap the interest rates chargeable by banks tp a rate that is not higher than 4% of the Central Bank Rate (CBR).
In a memorandum sent to MPs, Uhuru argued that the caps had forced banks to change their focus from SMEs to large corporate borrowers.
“It is apparent that the capping of interest rates has caused unintended effects that are significant and damaging to our economy and in particular, the Micro Small and Medium Enterprises (MSMEs) which are the hardest hit,” read part of the memo.
According to Citizen Digital upon the signing of the Finance Bill by President Kenyatta, new interest rates charged on loans will be left to the discretion of banks.