Rates cap law has not benefited consumers

The Central Bank of Kenya (CBK) building in Nairobi. Interest rate cap law signalled relief for consumers who could now access loans from banks affordably but the outcome has been negative. FILE PHOTO | NMG 

By SIVA KANILI

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Summary

• While six months may not be sufficient to make a full judgment as to whether the law has achieved its goals, the signs are not positive.
• Qualifying for a loan at mainstream banks has now become more difficult than before.
• Consumers have no choice but to consciously walk into the unforgiving jaws of the shylocks

Few Kenyans ever admit to having money at any given time. It’s the norm to always complain about tough economic times even when someone is clearly on the surplus side. In the recent past, though, the ‘hakuna pesa’ line has become real as majority of ordinary wananchi are cash-strapped.

It has been six months since the interest rates cap law was enacted. While it signalled relief for consumers who could now access loans from banks affordably, the outcome has been what social scientists term as ‘‘the law of unintended consequences.’’

While six months may not be sufficient to make a full judgment as to whether the law has achieved its goals, the signs are not positive.

In its good intentions, the law sought to make loans more affordable and accessible to the common mwananchi.

While the former was made possible, the latter though appears to be a distant dream hence betraying the whole purpose of it.

Qualifying for a loan at mainstream banks has now become more difficult than before. There is little chance for one to qualify for an unsecured loan. Banks have turned their backs to the majority at the bottom of the pyramid who are not in permanent employment or those who don’t possess any asset that can be used as security against loans. As a result, the primary beneficiaries have been the shylocks and the micro-lending institutions that were not captured by the law.

Unfortunately, the shylocks have taken advantage of the situation to charge exorbitant rates.

Consumers have no choice but to consciously walk into the unforgiving jaws of the shylocks. This has been made worse by the current tough economic times where people have to depend on loans for basic survival.