COTU-K Supports Bill to Cap Interest on Loans
The Central Organization of Trade Unions, COTU (K) supports the Banking Act Cap 488 of the laws of Kenya amendment bill passed by Parliament to Cap bank interest rates at 4% above the indicative Central Bank Rate (9 CBR) and ask the President of the Republic of Kenya to sign the bill into law. It further supports the proposal that the Chief Executive of Commercial Banks and other lending institutions face a fine of upto Kshs.1 Million or imprisonment for a term not less than one year or both if convicted of fluting the law.
- The Central Bank Governor is on record by admitting that lending rates are too high and that banks should be persuaded to lower the rates. The Banks in Kenya are insensitive to this request and hence raking in very high profits at the expense of their customers.
- That capping of interest rates would cause financial stability in the market in the long run hence workers benefiting from cheaper loans and improve in planning their lives or businesses.
- Manageable interests on loans would promote entrepreneurship especially in the micro and small enterprises and as a multiplier effect, create decent jobs, transition many businesses from informal to formal enterprises, and therefore have a stable economic and social growth in Kenya.
- The Treasury though opposing the amendment would have clear financial policy mechanisms to control the banking Sector by improving on supervision over the banks.
- Workers of Kenya would be able to pay their loans easily as it would reduce the default of payment rate.
- Cheap and manageable loan products like M-shwari by Safaricomare good examples where poor Kenyans access loans without conditions with low interest rates and have become popular and significantly raised the living standards of workers. They have been able to pay off with minimum defaults.
- Shariah loans is another good example in the Banking Sector and have loyal and successful customers due to acceptable conditions.
- COTU (K) therefore supports the bill by Hon. Jude Njomo, MP and urges the President of the Republic of Kenya H.E Hon. Uhuru Kenyatta to sign the Bill into law so as to tame high interest rates by Commercial Banks who are not ready to reducethe interest rates on their own.
Ernest N. Nadome
1ST ASSISTANT SECRETARY GENERAL