Whether World Bank and IMF et all are colonial masters or not does not take away from the following:

1. Int Rate cap of 4% + CBR has taken away unsecured borrowing in kenya (as one SME put it, better an expensive loan than none at all)

2. Private Sector Credit Growth is lowest it's been in years. If this continues, it will affect Kenya's Growth

3. More importantly, Interest Cap as is hand-cuffs the CBK's ability to effectively carry out Monetary Policy. Any move in the CBR rate now directly impacts lending rates, which was not the intent.

A. Imagine that CBK wants to increase rates to defend the KES at next week's meeting. If they raise the CBR by 200 bps, that means cost of deposits immediately jump from 7% to 8.4%, while cost of loans jumps from 14% to 16% the next day. This hits mwananchi immediately. An election year like 2017, this means that CBK is less likely to carry out its mandate because the increase in Int rates will be viewed negatively. CBR is supposed to indirectly influence interest rate expectations, not directly.

B. Now imagine that the slowdown in Private Sector Credit Growth scares the CBK, and they decide to stimulate the economy. The correct monetary action would be to reduce rates. If they reduce rates from 10% to 8%, this would mean that the max lending rates that banks can lend are at 12%. This would freeze up borrowing even further, as banks would be even more picky with who they lend to, and demand more collateral! Note that not even GOK can borrow at 12% long term.

No one is saying that the Idea of a rate cap cannot work in Kenya, but the current law restricts lending and also hamstrings CBK's monetary policy. IMF is correct, whether or not they are "colonial masters"

I suggest they "adjust" the cap and base it on KBRR instead of CBR rate. Also increase the band from 400 bps to ~800 bps.

This could have been done, but nobody thought that UK would sign the bill. There was actually some arrogance from banks after parliament passed the bill, after signing is when they went full panic mode. [b]CBK itself did not even give an opinion or a way forward,or an alternative[b]. So let them bleed, so that if t hey get another chance to give input when possibly reviewing the bill then they WILL give a way, knowing very well that the law will not be scrapped.

What??? Anyway, as I have been saying, some people will never let facts get in the way of a "good" argument!

Anyway, this is not the worst of it. In the previous page I have read a lot of unbelievable stuff I didn't even know which to reply to and what to ignore. I ultimately decided to ignore all of them!

Were you really following this issue from the beginning???