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"id": 472069,
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"speaker_name": "Sen. Billow",
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"content": "Thank you, Mr. Speaker, Sir. The Senators have sought very useful information; I will try my best to answer them. As for the clarification sought by the Senator for Murang’a, it is true that when you compare with other countries in the report that I had submitted; for example, in South Africa, the private sector credit is 100 per cent of the Gross Domestic Product (GDP) compared to the 42 per cent in Kenya. In other words, there is less money that was available to the private sector in Kenya than if you compare to Mauritius, South Africa and some of the other countries. Mr. Speaker, Sir, what he said is also true; that when you look at the lending rates for other countries like South Africa and so on, and so forth, it is much lower compared to Kenya. For example, in the same South Africa, it was 8 per cent in 2012 but nearly 12 per cent in 2009. When it was 12 per cent in South Africa in 2009, it was 14.8 per cent in Kenya and you could see that it compares. So, sometimes depending on the year and the circumstances in the country and the economy, and so on, and so forth, that change in the interest rates actually varies from year to year. However, Mr. Speaker, Sir, I agree that one of the challenges we have and the reason why this Kenya Bankers Reference Rate (KBRR) Rate was introduced last week by the CBK – it will remain in effect for six months, it can only be changed after every six months, it forms the baseline and they can only add their premium – and it has an effect, therefore, of reducing the rate significantly. This is a matter that has been agreed upon by stakeholders, which included the banks for the first time. So, it is our view that in the next few months, this rate should actually go down because of that competitiveness created by the KBRR; and it captures all the costs – transaction costs, the cost of the money and everything else and so on, and so forth – it is about transparency. The banks are now required to also publish every year their annual percentage rate which takes into account what their costs have been, and so on, and so forth. Above all, I want to also mention that there was a study done by the World Bank (WB) recently which shows that the actual cost in the interest rates in Kenya represents only about 48 per cent and that, up to 40 per cent is actually their profits. This study was done by the WB recently. Clearly, what it means is that with this rate and the CBK’s pressure for the banks to comply, there is really no reason why the banks should not reduce their rates. I think it is important for the CBK to start acting; it is not just about publishing a rate; but I think they must, as the regulator, put pressure on the banks to reduce their rates in line with this KBRR. So, I am hopeful that the situation will change. Mr. Speaker, Sir, the second question by Sen. (Dr.) Khalwale is about the Judiciary. Just before 2010, the Government set up the Milimani Law Courts that deals The electronic version of the Senate Hansard Report is for information purposes only. A certified version of this Report can be obtained from the Hansard Editor, Senate."
}