Lawmakes vow to disobey High Court’s ruling on interest rate cap law

Days after the High Court ruling that deemed the interest rate cap law as unconstitutional.

Legislators have vowed to ensure the continued hold of interest earnings from commercial banks’ lending to play down a hint at a return to expensive loans.

Kiambu Town Member of Parliament Jude Njomo, the chief orchestrator to the Banking Amendment Act of 2016, says Parliament will run their due diligence and align the capping legislation with the law.

“It was a very sad day for Kenyans, a day when commercial interest overload those of the people. I would however want to assure that parliament is sensitive to the feelings and needs of its people and we know of their opposition to high interest rates,” he said.

Legislators unstirred by rate-cap ruling

Meanwhile, former Gem MP Jakoyo Midiwo termed the ruling as suspect, critiquing its lack of provisions to protect consumers against the alleged rogue attitudes by Kenyan lenders.

“The ruling is suspect and must be appealed by both Parliament and the Consumer Federation. We are already consulting and will go to the courts. I have worked around the matter for quite some time and I know of their intent,” Mr. Midiwo told Citizen Digital.

Bankers and financial sector analysts have in the wake of the court ruling remained tight-lipped to reveal their rather pessimistic views towards a repeal of the cap through the Judiciary.

Eco-Bank Head of Banking Research George Bodo for instance expects little in the move towards an open-interest regime through the courts, hinting at parliament’s historical indifference to court rulings, remarks echoed by Genghis Capital research analyst Churchill Ogutu.

“It’s just a question of wait-and-see as based on the precedent, parliament has tended to ignore court orders sighting their own independence,” he said.

In spite of the muted expectations on the repeal of the rate-cap law, Kenya Bankers Association Chief Executive Officer Habil Olaka expects the ruling to re-ignite the debate on the effects of the rate cap offering a platform to re-weigh the legislation.

“We are seeing an opportunity to re-engage with various stakeholders to chart a way forward as the ruling has for instance given parliament a window to fix the shortcomings in the law.”

Interest caps to commercial lending by banks have been in place since September 2016 and have had an effect to wipe out credit flows to the private sector with banks changing tact to prefer investments in fixed-income instruments such as Treasury bills and bonds.

The rate-cap however remains in place over the next 12 months to afford parliament time to resolve the identified shortcomings.

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