NAIROBI: Credible pointers that President Uhuru Kenyatta will reject the Banking (Amendment) Bill for what his anonymous handlers call a "win-win" situation for banks and consumers do not come as a surprise.
Regrettably, his indecisiveness and unprecedented delay in determining the fate of the Bill offers a glimpse into his state of potential conflict of interest and stranglehold by bankers. Needless to mention, this is contrary to the public good he swore to defend.
High interest rates are not a product of academic arguments by elite economists, majority of whom speak for themselves. In a bandit-like economy, neither transparency pricing nor forces of supply and demand can trigger competitive pricing.
On the contrary, high interest rates result from a poorly regulated sector, where bankers are kingmakers, where government borrows its own funds from commercial banks at exorbitant rates.
The shock waves that followed the recent collapse of various banks exposed an unrivalled rot of insider-trading and outright theft.
That the affected bank directors are walking free confirms missing political goodwill to stem the rot within the banking sector.
The President's tough talk on the same faded as soon as he pronounced himself to taking stern action against individuals involved in bringing down banking institutions.
Consequently and talking high interest rates, the President is either with consumers or with the "terrorists". There can never be a contemplated win-win situation between consumers and bankers.
By rejecting the bill, as he is poised to do, the President will have a handed a clear "winner-takes-it-all" to bankers at the chagrin of consumers.
Government has to stop the strong perception that banks, under their lobby Kenya Bankers Association, style themselves as though they are a law unto themselves. They seem to have the dotted line discretion of choosing which law suits them or else they fight it in all directions.
If all legislation must be negotiated for those that it is supposed to regulate - then why can't criminals form an association and ask Parliament to re-negotiate the basis on which they can be apprehended or even jailed!
On instilling sector discipline, Central Bank of Kenya (CBK) has remained a lame duck on bringing sanity in the banking and financial services sector.
The fact that it is the National Treasury and CBK who are shouting at the top of their voices against interest rates capping is not only ironical but disturbing.
No wonder it is the very same manner banks oppose the capping of interest rates that some of them want to have certain individuals as their CEOs for life against CBK's wish. The argument that you need to amend the Consumer Protection Act 2012 and or bring up a new financial sector consumer protection law is superfluous. Why?
First, though deriving constitutional mandate under Article 46, the administrative organ under the Section 89 of the Consumer Protection Act is a mere "advisory committee" reporting to Trade Cabinet Secretary. It neither has enforcement capacity nor powers.
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Since 2013, Kenya Consumer Protection Advisory Committee (Kecopac) has by default and perhaps design, had so many false starts – without a functional office or staff, three years later.
Efforts to transfer such powers from CBK to the said body are either a delaying tactic or akin to moving consumers from the frying pan onto the fire of pain.
Second, even if banks intend to set aside a reserve fund of whatever magnitude, the cost of the same will be passed onto borrowers in one way or the other. This is because commercial banks are not charitable entities.
Third, Kenya's banking sector has without doubt demonstrated that self-regulation which KBA and other anti-interest rates capping law shenanigans are pitching for, is impractical or has been overly abused.
Fourth, interest rates setting is normal, after all the Central Bank Rate (CBR) is a form of interest rates capping. The fact that there is an allowable 4 per cent over and above CBR ought not to be an issue at all.
Fifth, banks are over-charging interest to cover for wastage, excessive margins and corruption.
From the foregoing, we urge President Kenyatta to sign the bill and allow for amendments of the same at such time that banks would have met consumer expectations in line with Article 46 of the Constitution.
In the likely event that the President rejects the Bill, we urge all MPs to turn up in large numbers and veto the Presidential recommendations in a bi-partisan manner.
Should MPs fail to garner the right numbers to veto the President, Kenyan consumers must explore other options, including calling a national peaceful demonstration, legal action against various quarters and consider amendment of the law by popular initiative.
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