Reading this CBK report on impacts of interest capping

Perverse outcomes

1. In the first three months of interest rate capping the number of loan applications increased by 20 percent. However, between December 2016 and April 2017, the growth of loan applications decelerated to 2.3 percent.

2. The average loan size has increased by 36.7 percent between October 2016 and June 2017. The rising value of loan size vis-à-vis reduced number of loan accounts reflects lower access to small borrowers and larger loans to more established firms after the imposition of the caps.

3. The number and value of mobile loan approvals have been rising from 4 million in March 2015 to about 9 million in June 2016. Thereafter, the number of approvals remained almost constant with only a temporary dip in September 2016 following the uncertainty as to whether the law applied to mobile loans.

4.Most banks reported increased deposits which were channeled to government securities market instead of enhancing lending to the private sector.

5.Small and medium size banks significantly scaled down accumulation of reserves. Small and medium size banks depleted their reserves or did not have enough profits to shore up their capital base after the caps were introduced.

6. Growth in loans by MFBs declined significantly since late 2016 while that of SACCOs has declined marginally. This suggests that customers being rationed out by the commercial banks are not being accommodated by the institutions.

7. On September 20, 2016, the MPC, in its regular meetings, noted that inflation was expected to decline but had concerns with the slowdown in credit to the private sector. Consequently, it decided to reduce the CBR by 50 basis points to 10.0 percent with the anticipation of reversing the declining trend. However, credit to the private sector continued to decline leading one to conclude that the monetary policy action produced counterintuitive results… a loosening on monetary policy yielding unexpected decline in credit to the private sector.

8. Going forward, under the interest rate capping
regime, there is no guarantee the central bank will be
able to achieve its intended objectives.During the phase of monetary policy loosening to stimulate credit expansion to support growth, the interest rate cap will also adjust downward. As a result, those individuals with credit risk above the capped rate will be shunned by banks thereby leading to contraction in growth of credit to the private sector.

UBA, GT banks down in PBT by double digits. Sidian slides into loss of KES 632m

If the interest rates cap law is repealed in september,the effects of it will be felt in 2019.
For those waiting for banks profitability to rebound,that will be from FY2019.

The CBK Gvr might be shown the door for colluding with banks/KBA to deny Individuals and SMEs credit in an aim to force a repeal #Interest rate capping Law!!!

The guy is academically clever, but very unwise and rash...bad bad decisions throughout his tenure so far...

Now the depate is taken from the streets to the house where the true hustlers lie

MPs accuse central bank, IMF of conspiracy against rates cap law

https://www.businessdail...1254-21g1rmz/index.html

MPs oppose CBK Governor's bid to undo interest rate capping
Read more at: https://www.standardmedi...o-interest-rate-capping

He is a terrible politician too. Bringing the evil duo - IMF and World Bank - to bat for him, re: interest rate cap, was just baaaad!

Kwani he did not live in Kenya during the dark days of Structural adjustment?

So that includes the hard stance he took on rogue banks such as Chase, Imperial etc.....???

Not quite.

We are going back because the government does not want to take the difficult calls, namely, fiscal discipline and the hard choices that go with it. Ultimately this is the only real solution to the interest rates issue and I suspect the market and other forces will eventually force Uhuruto's hand. But this is a can that Uhuru would rather kick further down the road and hence the Caps repeal promise. I suspect Ruto will inherit this skunk, among many others.

Meanwhile the, poor innocent Banks (safi kama pamba) are going to take a PR hit once the debate in parliament and the public arena gets going.