The Finance Bill 2019, has been assented into law by President Uhuru Kenyatta. The Finance Act 2019, among other provisions, repeals section 33b of the Banking Act that provided for the capping of bank interest rates.
The repeal of section 33b of the Banking Act is expected to enhance access to credit by the private sector especially the Micro, Small and Medium Enterprises (MSMEs) as well as cut out exploitative shylocks and other unregulated lenders.
Members of parliament failed to reach the quorum necessary to overturn President Uhuru’s recommendations to remove the interest rate cap law. Only 161 members of parliament were present against the minimum of 233 members needed for a vote. The house could not debate over the matter and the proposal was therefore passed without a vote
Present during the signing ceremony were Speaker of the National Assembly Justin Muturi, Head of Public Service Joseph Kinyua, National Treasury CS Ukur Yatani, and Attorney General Paul Kihara. The new law introduces a tax on income raised from the digital marketplace as a measure of ensuring equity in taxation and exempts the National Housing Development Fund from income tax.
From now henceforth, new interest rates charged on loans will be left to the discretion of banks, as opposed to the capped interest rates that have been in place since September 2016. The perceived fear among both members of the public and legislators is the return to the chaotic pre-capping regime which saw the charging of exploitative interest rates which touched a near high of 30 percent in some cases.