When they realise that they can actually make more money by lending carefully to credit worthy individuals and companies.

When it hits them that CBK is not and will not accept those high bids they have been putting in for bills and bonds.

When CBK decides to accept even lower bids of 9.5%, then 9%, and eventually go to 8% for bills and bonds.

@Obi.
Are you sure about that?
Example;
In Matata business, that 50bob to cops, under which of the 'traditional 4 factors' does that fall under?

@tom-boy.
Would you just answer the question in dark blue please!

Until the other day, Barclays in UK and the one here were under one directorship.
However their interest regimes were as different as it gets as a function of the different environments in which they operate.

As an investor, one consider all the factors contributing to cost of product/sales/providing service including risk then prices his product/service.

My fren, the problem is that you want to take the example of a few businesses that you know and assume that that is the norm. On the contrary, with every 1 business that seems to do well while paying 25% interest rate, there are probably more than 10 start ups ( by your definition) that have been ruined by the same unpredictable high rates. There are probably thousands who have been auctioned due to same high rates.

Please sir, list for me 5 clean businesses that will qualify for a bank loan and give > 25% return on that loan, so as to emerge multi million business in 6 yrs. Please note the words qualify for a bank loan. Not shady, connections ridden loans that usually involve kickbacks and equally shady deals.

My fren, the problem is that you want to take the example of a few businesses that you know and assume that that is the norm. On the contrary, with every 1 business that seems to do well while paying 25% interest rate, there are probably more than 10 start ups ( by your definition) that have been ruined by the same unpredictable high rates. There are probably thousands who have been auctioned due to same high rates.

Most small businesses that take loans at high interest find it very difficult to grow. They end up mark timing, struggling to stay afloat. Having cash flow but no real profit.

Whereas I recognise some trading businesses can make handsome returns through compounding, my arguement is that high rates divert capital to such trading enterprises like mitumba and land traders whereas that capital could be better utilised in farming,manufacturing, tourism and construction.

I love the rate cap. I think its brilliant because it is punishing bad borrowers while rewarding good borrowers at the same time. My only problem with it is I think CBK need to drop their base rate even further so that interest rates drop to sub 10%.

If banks are comfortable lending at 25%, then then should be comfortable lending at 14%. If they are uncomfortable lending at 25%, then they should be uncomfortable lending at 14%. No need to punish good borrowers in order to reward bad borrowers.

I say let banks close if they want. Let businesses that fail due to bad financial management and poor strategies fail. The mess that is bad loans needs to clean itself somehow. When all is said and done, stronger, more financially responsible businesses will raise from the ashes.

Economic depression leads to a myriad of social problems, you wish unto Kenyans. In such a mess, @TNT, we all drown. One way or the other.

Its not just business people who borrow. People also want affordable mortgage. Increased mortgage uptake will spur construction, jobs and consumption.

Manufacturers and agribiz are crying out for affordable credit. Credit that goes to increasing production capacity, not to trading.

Hospitals all over Nairobi are constucting, increasing capacity. They are using equity fund money for the most part. They have been crying for affordable credit for many years.

Business people who feel strangled by current rate caps may actually be those that have been encouraging banks to lend to them at high rates thus punishing other good businesses that cannot afford to pay high rates but are otherwise stable and viable businesses.

Your biz @mkeiy must be a trading business. Those are the ones that can pay such rates comfortably. Or land traders. People with connections and nothing else but get a ride on other peoples money with no guarantee of paying back as they cannot demonstrate consistent cash flow but have a potentially dead asset.