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"id": 269598,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/269598/?format=api",
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"type": "speech",
"speaker_name": "Mr. M’Mithiaru",
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"speaker": {
"id": 72,
"legal_name": "Ntoitha M'mithiaru",
"slug": "ntoitha-mmithiaru"
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"content": "Mr. Deputy Speaker, Sir, it is not an offence, it is not breaking any law, it is not against any regulation to borrow from the discount window. However, the banks are in the business, so when they saw that the rates were cheaper, it was only reasonable that they take that route. It is out of that that we see the discount window activity in 2010, the volume or what we call turnover was Kshs11 billion. If you take the discount window turnover; I am not referring to loss, I am referring to the turnover because of the period. When you talk of the turnover of the discount window, the activity there from March, 2011 up to December, 2011, it was Kshs600 billion. So, the issue is; what was really going wrong here? Were the banks so liquid? Our Committee had to have an inquiring mind here to ask what has gone really wrong. What was there earlier on? We had post election violence, financial meltdown and deficit in current account, but we never saw that activity in 2009/2010. However, in 2011, that activity was there. So, the issue is; what was actually really going on here? That is where our Committee made some deductions. When the interests rates went that high and when the value of the shilling fell down and weakened, then you could see how it affected the Kenyan economy. That is why the domestic interest rates went so high because the Central Bank of Kenya also adjusted the CBK rates which now stand at 18 per cent. That 18 per cent is the base on which the banks will fix their base rates and hence now their lending rates which is now upwards of 30 per cent. Can Kenyans really afford to service a loan that is 30 per cent and above? Can Kenyans who want to develop do so? Some Kenyans, especially the home owners, have really been impoverished such that now they are unable to repay the loans. For that matter, the ordinary Kenyans and all Kenyans have been affected. Mr. Deputy Speaker, Sir, when it comes now to inflation which is now at a runaway rate, today many Kenyans are living on less than a dollar a day. Can they even afford a packet of unga ? These are the questions that we really have to ask. For the Members of this House, sometimes when we have a Committee like this one trying to get the cause of all this, I urge the hon. Members to look at the real issues, so that we can see what is ailing Kenyans and we deliver to Kenyans what we know will assist the economy of Kenya. If I can just give a small example on this; for the whole of 2010 up to March 2011, the inter- bank rate never rose beyond 2 per cent. In the same period, the CBK window was 6.75 per cent. So, the rate was punitive. Compare this with the rate in June, 2011, that is when actually the discount window rate was brought down. On 29th August, 2011, the discount window rate was 19.83 per cent. However, the inter-bank rate was 27.72 per cent. You could see the kind of variance that there is, making the discount window cheaper than what obtains in the market. Sample this: On 15th November, the inter-bank rate was 22.5 per cent when the CBK was 30.1 per cent. This again was more expensive than what obtains at the CBK window. Our Committee was trying to narrow the causes of this because the argument was that the issue of the current account did not arise because we have been perennially in deficits. So, that was not an issue. The issue of the Euro crisis was not an issue. We even had a global financial meltdown; so that was not the issue. On the issue of the increase in oil prices, that has been prevalent. However, we never saw the kind of runaway inflation and a terrible decline of the shilling that we have seen now. That activity at the discount window; our Committee is compelled to lean towards that direction; that what was so amazing here that there was that kind of activity which was six-fold more than what was being done previously. Today, I saw a statement from the Kenya Bankers Association saying that the Committee is trying to mislead the public. I wish when they appeared before the Committee they had been able to give that kind of a report which they never did. All the banks that appeared and are trying to make noise; they were given the opportunity, but they never even mentioned what they are now highlighting in the media. Some banks said that they never visited the discount window, but records in our possession show they actually visited the discount window. So, there is some dishonesty in this particular respect---"
}