Kenya Commercial Bank (KCB) Chief Executive Joshua Oigara wants lawmakers to review the interest rate cap law to have it apply to a few key sectors only.
According to Oigara, the “one size fits all” model of the rate cap that came into effect in September 2016 needs to be remodelled to help the financial sector unlock opportunities in the economy.
“I think we are in a position to negotiate and agree on some trade-offs. I don’t think if we can continue fighting and pushing for the agenda the way it is. We believe there are sectors to cap and those to leave open markets to operate,” said Oigara.
In a session with the Press last week, Oigara urged Kenya to go the South African way and reform the existing cap ceiling so that it only applies to key sectors such as agriculture, SMEs and housing.
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He ruled out the possibility of the law being repealed in the current financial year, saying banks will need more than just saying that the cap is adverse.
He said only small borrowers have felt the difference. “Large corporates have never been guys to discuss about caps. They don’t need any body to negotiate for them. Do you think Safaricom or an MP would need anybody to negotiate for them the price?” he posed.
Oigara said the solution in taming high interest rates lies in expanding the economy, creating more activities to bring in more revenue and cutting government reliance on domestic borrowing.
He opines that National Treasury has been the biggest beneficiary of the cap since it is an active borrower in the local market.
This dims hopes of reversing the cap. “If you are seated at the National Treasury, why would you increase your own cost of borrowing?” asked Oigara.
