Commercial Banks have been out here promising the public that they will not be tempted by the repeal of interest cap law, that leaves borrowers at their mercy. They are unanimously adopting the let’s wait and see approach, careful to keep the existing customers who are the heart and soul of their business, but while at it letting in new borrowers.
Those against the repeal feared that banks would snap out of interest cap chains and hit the exorbitant interest button, to make up for the three years that were trapped in the law. Looks like the banks had forecasted the outcome and put in place strategies to see them through.
What should a common Mwananchi, SME or corporate do at the moment? Borrow now and invest, because at the right now banks are more willing to give loans since they have nothing much to lose.
“There is a need for people to take more loans because the repealing of the interest cap is an expansive monetary policy that is going to be effective. We’ve seen the government struggle with its fiscal framework, but with the opening of the monetary policies, the taking up of the loans will be important for us as individuals as SMEs as corporates,” said David King’oo an Investment Analyst at Cytonn.
While at it, you should be prudent about how you spend it. With too many houses to let, and the price of land appreciating at a slow rate, real estate may not be as promising as it was sometime back. He advises that people should go the mixed residential way in real estate. This is where people pool resources and construct residential, with different amenities inside, could be retail, a school, so that residences can have everything within their reach.
Alternatively, an individual can pick a loan and look at the structured product, where they can divide the portfolio into different aspects of the money market and leverage interest income to earn something and ensuring the risk is spread.