@tom_boy you do realize that 3m loan at 25% for 1 year will only cost you just 421K in interest. If you import Japanese mitumba cars, buy and sell maize, buy and sell plots, trade shares you can still make a small margin and repay the loan. If you don't have that credit at 14% then does that not limit your economic activities.

Very good, now we are getting somewhere.No we are not because you want to control the marketsMarkets have always been controlled. That is why there are rules and regulations in every economic activity. Just by reading the budget and introducing taxes here, levies there, exemptions here, the Goverment is in effect controlling/influencing market direction. Interest rate control can be looked at an influence towards better quality lending.

So, is it your position that giving people loans to buy mitumba cars and sell to others ( on loan) is a sound way to grow the economy?
Do you realise the opportunity cost is that businesses ( manufacturing, agric, tourism) that need 14% loans are denied a facility in favour of 25% mitumba dealer. How does this grow the economy? Satisfying Consumer demand to improve lifestyle that's how the economy grows. Mitumba cars sell like hot cake especially with young upwardly mobile 24 year olds. The cars consume fuel as they go to Naivasha to revel and helps tourism too. KRA gets duty, KPA staff, broker at the port gets a salary plus the prisoner making the number plates, the insurance guy, Omosh the mechanic etc. All those fellas will equally be employed in manufacturing, tourism (as waiters, tour guides), agriculture as KYM's, brokers, sellers etc. Its just a matter of which direction the economy grows. If capital was directed away from the mitumba economy and towards real value economy, the growth would be astronomical.

Which bank has ever given a loan, even at that 25%, to a broker whose MAIN job is agricultural commodities. No other stable income source to service the loan. My point, this broker, without a salary, but able to access 25% loan to buy and sell maize, is a figment of the imagination of ' western economic theorists'. Assuming this guy has another regular income and was able to service a 25% loan in the past, why deny him a 14% loan to continue with his business? How has the risk changed? If he did not default at 25%, why should he default at 14% thus justify denying him the facility. In a credit crunch there is a flight to quality borrowers. That guy is low quality borrower, he is the last in line he can only attract capital at 25% because govt a prime borrower attracts capital at 13.5%. Just like my friends and relatives I give them interest free loans they can't pay wont pay so I refuse to lend them cash they end up at the shylock and pawning their furniture at 50% interest. Ask the Youth fund how many guys repay the 8% loans or HELB loans. here you conveniently ignore my analogy. This low quality borrower would not qualify even for the 25% loan. If indeed he has been qualifying for it, then there is no reason to deny him a 14% loan since nothing has changed other than a Goverment directive. His capacity to repay has not changed. The only change is a goverment directive. Why deny him a loan at 14%.

Encouraging people to buy, hoard and sell plots on 25% interest loans? How does this help the economy? Why dont we also encourage them to buy , hoard and sell maize to the highest bidder? Refer to my earlier comment

Shares? Buying shares on loan? Is this a business? Can a bank loan money to such a business? Yes banks were lending like crazy for the Safaricom IPO.
Such were the good times How many people got burned by this ipo and others? How did their getting burned improve their livelihood or the economy? A few people made cash but overall many got burned. In any case, those who successfully borrowed had another source of income to service the loan. Therefore my question remains, If the bank can give me a loan at 25% for a risky venture because I have an alternate source of income, why not give me the same loan at 14% as long as my ability to pay has not changed?

25% interest encourages banks to loan to sectors/ individuals they should not be loaning money to in the first place. Secondly, it denies real business people, in manufacturing, agric, technology, construction, the money they need to grow as they are forced to compete for credit with conspicuos consumers.In the market it's willing buyer willing seller. 25% circulates cash in the economy, 14% only the govt and prime borrowers get credit. The consumer who would have bought the mitumba car foregoes consumption, and without his usual side hussles he consumes less goods and services then next nakumatt is not doing well,
deacons is not doing well etc.Good point, I accept. However, to get even more money circulating in an economically beneficial manner, would it not be better to loan to good borrowers who will put that money to good use to generate jobs and even more money. This idea of willing buyer willing seller is another myth circulated by 'western economists'. Goverment control is always present, whether you see it or not. Goverment has a hand in pricing of all commodities sold in this country. Just because it chooses to show its hand more forcefully in the matter of bank loans is no reason to shout about controlling markets. how come nobody is complaining about free market when it comes to 90 bob maize? These theories apply when an economy has satisfied basic things like employment, food security etc etc. For as long as we have unemployment, money should go to industries capable of creating employment in multiples or commensurate with capital invested. Putting much needed cash in trade of mitumba and buying imported crisps, while local industries cannot expand for lack of the same capital is not wise.

Yaani people have time to respond to tom_boy
All the best

Dereva ni mlevi na makanga ni mwizi. Gari inakimbizwa na haina brakes. What do you expect