@guru, What i don't get is how, by lending to the same farmer at 28% solves the problem.
Higher interest rates lead to higher defaults,but compensated by higher repayment above principal.

The amounts that gov't borrows is not infinite,banks will have to lend the extra cash.

Interest rates are not going to remain above 15% for ever, how about when CBR comes down to single digits?
Ain't interest cap going to work for that farmer?

I say cap them. A range of between 3%-5% won't be that bad.

You misunderstand my point. In your post, you used regulation and price control interchangably, the two are not synonymous.


My point was all 'price controls' are Regulation. But the gambit of Regulation (an inescapable reality) is wider than just 'price controls'.

In Kenya for example, these interventions had a different key motive in my view, while only affecting price indirectly:
- In duplum
- Freeze currency speculation
- Setting telecom MTR rates
- Capping Margins on interest rates

@guru...the system will always find a way of stabiling itself and creating equilibrium.Yes bonds and short term paper will- be around 8-9% when the CBR rate comes down to 5%,banks will still be forced to lend out not only to HNWI and big firms but to everyone who is credit worthy as default rates will be much lower and the uptake of loans will be huge.Competition between banks will dictate who makes the most profit and the bannkor banks that will be willing to expand their loan portfolio will edge out those that will be conservative and selective in their lending...countries that have lending rates @ 5% still have baks which loan out individuals,the same case will apply here..

@the deal Have you seen the rates the farmers with no collateral pay... Some are payin 26-29% while we all know the secured loans are going for 19-21%..

This is why equity lends to them.. Take this away and their source of credit is gone.. It will be The destruction of the SME sector..

Some times I think that those who advocate for controlling of bank interest rates have probably never borrowed from a bank. Reason: why would anyone in their right mind borrow at 25% when the major banks are lending at around 15%?

Proof: Last month a neighbour needed to buy a car; she walked into Equity and enquired. They said car loans are at 14.5%. She signed the papers and three weeks later she had the car.

So, I ask: where are these banks that are charging 25%? HAKUNA KITU KAMA HIYO!!

DISCLAIMER: I am not an employee of EQUITY, but I am a shareholder.