Uhuru Finally Approves Controversial Banking Bill

President Uhuru Kenyatta on Wednesday finally assented to the Banking Amendment Bill 2015 after days of waiting.

According to the new law, banks will be forced to cap interest rates at 4 percent of the rate provided by the Central Bank of Kenya (CBK).

The move will see commercial banks compelled to charge interest rates of up to 14.5 percent as the CBR now stands at 10.5 percent.

The proposed law had sparked a lot of controversy with the Kenya Bankers Association (KBA), the umbrella body of commercial banks in the country, urging the President to reject the bill.

KBA dismissed the bill noting that the rates could be lowered without the need for legislation.

In a statement, President Kenyatta said: “I have consulted widely and it is clear to me from those consultations that Kenyans are disappointed and frustrated with the lack of sensitivity by the financial sector, particularly banks. These frustrations are centred around the cost of credit and the applicable interest rates on their hard–earned deposits. I share these concerns”.

Mr Kenyatta indicated that it was essential to sign the bill as in the previous instances, banks promised to lower the rates but they never lived up to the promise.

"This is the third time that the National Assembly is attempting to reduce interest rates to affordable levels. In the previous two instances, dialogue and promises of change prevailed and banks avoided the introduction of these caps."

"In those instances, banks failed to live up to their promises and interest rates have continued to increase along with the spreads between the deposit and lending rates," Kenyatta said.

The head of state mentioned that he was aware that the new law would present difficulties which include credit becoming unavailable to some consumers and the possible emergence of unregulated informal and exploitative lending mechanisms.

He, however, noted that his Government will monitor the difficulties closely so as to avert them.

Shortly after the President announced his decision, the bankers said they were still opposed to the law but they would comply.