Banks in Kenya are in talks with the government about changing a law that caps commercial interest rates as lending in East Africa’s biggest economy slows.
President Uhuru Kenyatta introduced caps on lending rates in August, against the advice of the country’s central bank and the Treasury. But It’s failed to rejuvenate private-sector credit growth, which slowed to a 16-month low of 4.3 percent in December from 18 percent a year earlier. The International Monetary Fund warned this month that the retention of the rate caps could cut Kenya’s economic growth rate by as much as two percentage points this year and next.
The caps have limited access to credit by small- and medium-sized businesses as banks resort to “less risky” lending to the government.
