I agree with you @ 2012 there should be some sort of regulation when it comes to lending rates,personally I believe its unethical for a bank to charge 25% upwards for any loan while on the other hand you,l be lucky to get a measly 4% p.a on your deposits...

@2012, good arguments. Most would now agree pure Capitalism as a market system is flawed. Government regulation is required to protect the marketplace from manipulation, and even enhance competitive forces that nurture Capitalism.


Hence the min/max caps on interest spreads should be set, beyond which social aspects of the macroeconomy would detoriate - banks running tyrant and poverty sharply increasing.

Coincidentally, wasn't Central Bank intervention in effects of USD/KES crisis towards the same end? Our collective good was at the mercy of the banks. Too much regulation BAD; too little even WORSE.

@kizee1 in my opinion, the regulation is not meant to make credit cheaper but is supposed to prevent it from being outrageously expensive [limit/cap on spread] and I liken it to the in-duplum rule.

Okay I agree price controls are to be frowned upon, but not all regulation is price control.

All economies and markets are regulated to some extent. A laissez-faire state and completely free market has never existed.

@mkeiy a cap on lending rates will have a detrimental effects on the common mwananchi... imagine if the CBR was 18% and interest rates were capped at 22%..

Why would I as a bank lend to small scale farmer @ 22% and incur all the risk of default when I can simply lend to GOK through risk free treasury bonds @ 20-21%???

There will be absolutely no incentive to lend to the common man so the banks will hoard the loans to them..

@guru 267...I tend to disagree,you are looking at only one side of the situation what happens when the CBR rate is between 6-8%,when government securities arent an attractive form of investment,banks will have to lend to the common man so as to boost profits,the kind of regulation we are talking about isnt retrogressive or harsh as we can put it rather one that will bring some sort of sanity in the banking industry and to the lending rates that the citizens are exposed to,25-28% is morally wrong...i also tend to think that kenyan banks should diversify so as to earn revenue from different sources that way they can afford to have lower lending rates while in the meantime maintaing or even growing their profits in the long run...