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Vol 57 No 18

Published 9th September 2016


Uhuru goes banker-bashing

The interest rate cap is a blatantly populist measure but banks were risking retaliation against notoriously high profit margins

President Uhuru Kenyatta opted to ditch the advice he received from senior economists at the Central Bank of Kenya and the Treasury and signed the Banking (Amendment) Bill on 24 August. He hopes this populist measure will win him votes in next August's elections. The law caps at 14.5% the maximum interest rate which commercial banks can charge for loans, so Kenyatta is continuing the interventionist trend set by July's budget. Top economists who argued against the measure included CBK Governor Patrick Njoroge, Finance Minister Henry Rotich, Treasury Principal Secretary Kamau Thugge and Paul Murithi Muthaura of the Capital Markets Authority, supported by the Kenya Bankers' Association (KBA) and the Nairobi Securities Exchange (NSE).

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