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{
    "id": 846664,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/846664/?format=api",
    "text_counter": 191,
    "type": "speech",
    "speaker_name": "Kikuyu, JP",
    "speaker_title": "Hon. Kimani Ichung’wah",
    "speaker": {
        "id": 1835,
        "legal_name": "Anthony Kimani Ichung'Wah",
        "slug": "anthony-kimani-ichungwah"
    },
    "content": "I now move on the issue of the interest rate capping. This is a matter that came up in this House through a Bill that was introduced by Hon. Jude Njomo; who happens to hail from my county, Kiambu. As the Chairman of the Budget and Appropriations Committee, I have had occasion to interact with the representatives of the International Monetary Fund (IMF) and the World Bank on the matter. I have also conversed with the Governor of the Central Bank of Kenya (CBK) as well as with various stakeholders in the banking industry. I can tell you that all the issues that have been brought to us and conversed in the public, are based on data and information that is very skewed. It is data and information that has been coming from the industry. I find it compounding because I have had very biased information, as Hon. Chris Wamalwa says. I have had occasion to look at proposals that came from the Institute of Certified Public Accountants of Kenya (ICPAK), which Hon. Amos Kimunya once chaired. It is an institute I have affiliation to, being an accountant. The ICPAK is indeed in support of the status quo in the interest rates capping. Their support is based on data they have collected from various sources, including the CBK on monetary policy statement that was released earlier this year, based on the 2017 Report. If you read some of the articles, you will realise that they attribute to the reduced credit and a slowdown in economic growth. During the 2017 electioneering period, unlike what players in the banking industry is telling us – the reduction in credit to SMEs has been occasioned by the interest rate capping law that came into being in 2016. It is common sense to anybody in this country, and anywhere in the world; that what happened in this country in 2017 occasioned a slowdown in economic growth. Therefore, people did not borrow more. Indeed, all the data coming from independent sources, other than the banking sector which shows that the reduction in lending to SMEs has been very marginal and in line with the slowdown in economic growth, as a result of the activities of the 2017 electioneering period. The affected sectors included agriculture. Hon. Members will recall that towards the end of 2016, when this law came into effect, the agricultural sector was badly hit by drought. Therefore, players in the agricultural sector were not able to borrow from banks. The data that is available speaks to this fact. Therefore, what the banking sector and some people within CBK have been able to tell us that, the bank interest rate capping law has curtailed lending to SMEs is, indeed, not true. I ask Members to ensure that this law remains as it is in the worst-case-scenario. I have said this before. I am on record elsewhere that I am amiable to a situation where we reduce the lower cap. That will make a little bit of sense because the CBK, through its monetary policy, will have some flexibility. That way, borrowers will benefit when the inflation rate goes down. The CBK will reduce its base lending rate. We also run a risk when we over-control the lower cap. Even when inflation reduces, the CBK may not be able to manipulate its basic lending rate as it would wish. I have had occasion to speak to the Chair of the Departmental Committee on Finance and Planning. I proposed that even when we review the lower cap, we should never leave the banking industry to intimidate this House and Kenyans by reviewing the upper cap. This is because they will simply take this country back to the era when bank interest rates were as high as 24 to 28 per cent. What reason would any bank give a Kenyan borrowing for charging such interest rates? I can give an example of the Cooperative Bank of Kenya, which had an average lending rate of 17 per cent at the time of capping. Without naming any institution, some banks were, during the same period, lending at between 26 and 29 per cent, yet they were operating in the same market with Cooperative Bank. That is why I also support the proposal that Hon. Jude The electronic version of the Official Hansard Report is for information purposes only. Acertified version of this Report can be obtained from the Hansard Editor."
}