Inability to see danger of inequalities blinds us to misery

Kenyan banks have been vocal opponents of, and persistent advocates against, the interest cap on commercial loans that became law in 2016. The cap restricted banks from charging interest at more than four per cent above the Central Bank rate, so as to make loans and capital more accessible and affordable to small traders and entrepreneurs. A few weeks ago, the High Court ruled the restriction on interest rates was unconstitutional. I have not read the judgment to understand the court’s reasoning, but I know that our Constitution advocates for the progressive realisation of economic and social rights, which are achieved when more people have jobs or can engage in business. And I know that when loans are expensive, when people are jobless, and when we do not encourage small and medium size enterprises (SMEs), we are courting trouble and disaster.

If Kenya is to get more people working and productive, and if we are going to eradicate poverty, it will be by focusing on the “lower” levels where the majority operate at, rather than any Big Four or Vision 2030 agenda. And when a regime thinks it can pull us out of the doldrums with large corporations and monopolies—which encourage dominance and servitude—it is a regime that seeks control, not development.  

No developed economy has been created on the back of large corporations, much as these get all the headlines. The Swiss economy with barely any natural resources is based on SME’s in most sectors, including the tourist industry. The American economy, even with its large and almost government sized corporations is premised on “mom and pop” businesses spread across the country doing everything possible. The Americans used to be quite good at breaking up large companies and monopolies in years past, aware that such companies could be a threat to the national interest and national security, as the story of the Ma Bell telephone company illustrates.

Our banks have pulled no punches in opposing these caps, claiming that their profits would suffer, and that this was not the best way to ensure affordable loans to SMEs. They did not provide any alternatives however, eager to continue with business as usual and keep on accumulating profits. They were strongly supported by the UhuRuto regime, which does not think growing inequality is a problem and which is the master of plunder at the expense of the poor as the Dams scandal illustrates.

The banks were also supported by the International Monetary Fund (IMF), which believes that laissez faire capitalism is the magic wand that will take us all into being developed economies, despite the fact that there being no evidence. Indeed, the IMF, rhetorically at least, has been admitting that its previous prescriptions have not been helpful and have in fact increased inequalities and thus tensions and frustrations across the world. In this context, it has been fascinating to see the profit statements from our banks that have been trickling in the last few weeks. Just this past week, Equity Bank announced its results for 2018, showing a jump in profits of five percent to an impressive Sh19.8 billion. It shows the profit rising on the back of lending to the state through Treasury Bonds.

Huge profits

Standard Bank Kenya also posted an increase in profits from Sh6.9 billion to Sh8.1 billion; Diamond Trust Bank posted a growth in profits of 2.2 per cent to rise to Sh7 billion; Cooperative Bank’s profits rose by 11 per cent to Sh12.7 billion; KCB’s profits rose by 22 per cent to Sh24 billion; Barclays Bank grew its profits by seven percent to Sh7.5 billion, and NIC Bank by two percent to Sh4.23 billion.

I know only the little economics I studied at A levels, but these results do not show a sector at risk or doing badly despite the interest caps! If anything, it shows a sector that grows amidst our troubled times made worse by Uhuruto regime that plunders and messes up like never before. A substantial part of these increased profits have come from increased bank fees and costs paid by the customers, adding to the pernicious taxes we pay for everything.

I wonder how much of these profits that the staff at the banks will enjoy, if we exclude the top executives? There was a time when being a good and successful business was not just about the profits made for shareholders, investors and executives; it as also about recognising that even that lowliest staff member who makes tea, or delivers mail, or is at the teller contributed to the success and would also share in the profits. In fact, that made for a much more committed staff that took pride in the company.

And there was a time when these sorts of profits would lead to lower costs for customers and better services as recognition that it is their loyalty that led to the profits. Sadly, our inability to see that growing inequalities will surely bite us and make Kenya a miserable place for the majority blinds us to creative commercial practices.

- The writer is former KNCHR chair. mkiai2000@yahoo.com