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{
    "id": 915018,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/915018/?format=api",
    "text_counter": 253,
    "type": "speech",
    "speaker_name": "Kiharu, JP",
    "speaker_title": "Hon. Ndindi Nyoro",
    "speaker": {
        "id": 13370,
        "legal_name": "Samson Ndindi Nyoro",
        "slug": "samson-ndindi-nyoro"
    },
    "content": " Thank you, Hon. Temporary Deputy Speaker for the chance to contribute to this Bill. From the outset, I support Hon. Waititu for these amendments to the Law of Contract Act, Cap 23. When you borrow money from a bank and somebody guarantees you, the beneficiary of that money is not the guarantor. The beneficiary is always the borrower. Therefore, the buck has to stop with the person who enjoys the utility of the money. That person is the borrower. Therefore, it is only reasonable that before you go to take the assets of the guarantor, you have to first exhaust all the avenues of making the person who enjoyed the utility pay up the money. That is the natural thing to do. As we talk about borrowing, we have to be aware of the current scenario in our country and the reason why defaulters list in our banks has increased. It is because of many reasons. First, as you know, the breadth of this matter is best displayed when you look at the major dailies. The best customers of our media houses are auctioneers. They buy pages and more pages in our newspapers. That is a clear show of how our financial market is, and basically, how our economy is doing. There are many reasons. One of them has been talked about by one of my colleagues. That is the cost of borrowing. Our Central Bank Rate (CBR) is around 9 per cent. If you compare it with other countries that have more efficient financial sectors like the USA, you will find that their Federal Reserve range is around 2.5 per cent. If you go to a country like Japan that has been quoted by my colleague here, you will realise that their CBR equivalent is negative whereas ours is at 9 per cent. If you borrow money, you are actually added some money. That is the bank lending rate from their Central Bank to the commercial banks. Therefore, even if we have capped our lending rates, our rates are still a bit high. There has also been a fallacy in this country that business people do not get finances from our banks because of capping our lending rates. I think this is a fallacy because even very developed countries like the US, there is a federal law of capping rates and you cannot go beyond five per cent from the federal rate in terms of lending to the end customer. I, therefore, tend to believe that our commercial banks are only frustrating the borrowers and especially worthy borrowers, the business people to find a scapegoat. As a country we need many ways of financing our businesses. If you look at our loan books in our banks, you will find that most of the loans are just for ostentatious expenditures. People borrow to buy sofa sets and big vehicles. I think, even as we talk about the cost of borrowing, we need to segment, so that the people who borrow money to drive our economy forward have less rates because they are doing worthy causes for our economy. You may borrow and you may qualify, but what are you borrowing for? Borrowing is not necessarily the only way of growing businesses. If you look at the countries I have quoted, you will find that the major economies, most businesses go to bank as a last resort. You first exhaust avenues like private equity where you have a business and you can sell a part of it to the financier who may exit at a later date by selling their stakes from that entity. Avenues like venture capital, Scheme Information Document (SID) investments will take a lot of demand from the current borrowers especially those who borrow for the sake of growing their businesses. 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."
}