Midiwo to push Bill to put limit on interest rates

CORD politicians from left George Aladwa, Daniel Maanzo, James Orengo and Gem MP Jokoyo Midiwo at the Central Police Station in Nairobi on September 19, 2015 to notify the police that they would a rally at Uhuru Park to support teachers' pay rise. Jakoyo Midiwo has vowed to fight high interest rates currently being charged by banks through an amendment of the Banking Act. PHOTO | ANTHONY OMUYA | NATION MEDIA GROUP 

In Summary

• The rates went high as a result of government borrowing from banks at 20 per cent interest rate; a situation that now forces individuals seeking for loans to pay back at a rate of between 24 and 28 per cent.
• The proposal, seen by Sunday Nation, also inserts a clause to have the minimum interest rate that a bank or a financial institution shall pay on deposits held in interest earning accounts shall be set at least 70 per cent in the minimum.

By MOSES ODHIAMBO
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Gem MP Jakoyo Midiwo has vowed to fight the high interest rates currently being charged by banks through an amendment of the Banking Act.

The MP said banks will rip off Kenyans if left to determine interest rates on loans they offer.

Mr Midiwo has thus drafted a proposal to amend the Act by inserting a clause that bars the banks or any financial institution from exceeding the interest rate charged for a loan or monetary advance by more than 3 per cent.

This will be based on the rate set and published in the monetary policy committee established in the Central Bank of Kenya Act, he said.

“We have taken the legislative path since these banks have become rogue and need to be tamed permanently so that Kenyans can do business,” Mr Midiwo told journalists in Kisumu on Saturday. He added that it was Cord’s plan to tame the banks.

CAUSE OF HIGH RATES

The rates went high as a result of government borrowing from banks at 20 per cent interest rate; a situation that now forces individuals seeking for loans to pay back at a rate of between 24 and 28 per cent.

The proposal, seen by Sunday Nation, also inserts a clause to have the minimum interest rate that a bank or a financial institution shall pay on deposits held in interest earning accounts shall be set at least 70 per cent in the minimum.

Mr Midiwo said it had become difficult for many Kenyans to do business under the current interest rates.

“I had attempted to do this but the forces were against me. But I think it is worth a try since the interest rates as they are today at 25 to 30 per cent is alarming,” he said.

He said the rates can only go up when there is total government shutdown, which is not the case in Kenya today.

Mr Midiwo said the banks are wrong to increase interest on money already loaned out, arguing there is nothing new in a loan that has already been given to a client.

He said the banks cannot keep taking Kenyans money and not paying for it, adding that the ideal situation would be if they are forced to pay 70 per cent interest on deposits.