Submission of Memoranda on the Bank Lending Interest Rates Capping
The Association of professional Societies in East Africa (APSEA) is a joint Forum and an umbrella body of professionals associations established in 1961 comprising of a corporate membership of twenty eight (28) professional associations from diverse professional disciplines in the country.
There are over 100,000 Professionals in Kenya. They include; Accounting, Agriculture, Arbitration, Architecture, Bankers, Chemists, Clerks of works, Consulting Engineers, Dentistry, Engineers, Food science and technology, Financial Analysts, Geology, Insurance, Law, Managers, Medicine, Meteorologists, Pharmacy, Physiotherapy, Certified Secretaries, Surveyors and Veterinary science.
Reference is made to the application by a petitioner, Mr. Boniface Oduor versus the Honourable Attorney General and four others. This petition relates to the Constitutionality of the interest rate capping and auxiliary provisions of section 33B of the Banking Act. These provisions were enacted through the Banking (Amendment) Act no. 25 of 2016.
Pursuant to the provisions enacted through the Banking (Amendment) Act no. 25 of 2016, APSEA hereby submit their views as follows;
- APSEA notes with concern that Banks operating in Kenya have contributed minimally to alleviation of poverty and ease of doing business of the Kenyan Citizenry owing to the exorbitant lending interest rates regimes they have exercised in the past. APSEA therefore fully supports the Bank Lending Interest rates capping as a mechanism to address the runaway cost of bank lending to the Kenyan population.
- APSEA notes that the judgement in the high court petition case no 413 of 2016, Boniface Oduor versus the Honourable Attorney General and four others made a provisional window period of 12 months for parliament to review the petitioner’s concerns which the court was in agreement with. These mainly focused on removing the ambiguity of words used in Banking Act Section 33B and providing clarity and harmony of the words in the section and the Banking Act Thus we urge parliament to urgently proceed to address this matter and we affirm our readiness and willingness to engage with parliament towards these efforts.
- APSEA sadly notes that the principal banking sector regulator, the CBK has not exercised neutrality in the case and has demonstrated partisanship and not acted independently on this case. We urge that, CBK resumes her independent role to support the government initiatives to address the exorbitant cost of lending credit by financial institutions in Kenya.
- APSEA notes that the banking sector plays an instrumental role in the Nation’s development and thus forms a key success factor in spurring economic growth through provision of affordable credit to borrowers in the economy. We also cognizant that unlike other parts of the world, the financial sector in Kenya is vibrant. There are also other alternative and regulated lenders at lower lending interest rates than banks e.g. SACCOs, Micro finance etc. who have not raised objections to their regulatory status on lending rates.
- APSEA has noted with grave concern the oligopolistic function of commercial banks in Kenya. The banks have tended to operate, collude and manipulate the market to deny many borrowers access to credit and also to portray the impression that lending interest rate capping has adversely affected their businesses, which is not the case. We urge that such coercive tactics should not be allowed to prevail in the Banking Sector in Kenya. We urge parliament to address concerns raised by the judgement and caused amendments to section 33B (3) OF THE Banking Act to make it constitutional.