By Francis Kajubi , The Guardian
FINANCE minister Dr Mwigulu Nchemba has been given four months until September to have the Treasury roll out a well-defined mechanism of interest rate control among independent creditors or loan issuers.
Dr Tulia Ackson, the Speaker of the National Assembly, issued this directive yesterday as MPs demanded controls on unregulated creditors charging interest rates way above regular rates tied to central bank benchmarks.
Echoing sentiments of MPs, she said such lenders are rampant in city streets, extending credits to people by uncontrolled interest rates and shorter loan repayment timeline centrally to the central bank’s laws and regulations.
Felister Njau (Special Seats- Opposition) had earlier raised the issue, demanding urgent debate on the matter, explaining that ‘loan sharks’ were pulling people into poverty on account of the number of people whose property are taken away after failing to pay unregulated loans.
The Speaker said that the loan issuers are licensed for the function but they impose interest rates that do not reflect regulatory rates. “They decide how much they wish to be paid without being regulated,’ she stated.
She further questioned the collaboration that ‘loan sharks’ maintain with mobile money service –providers, while the minister stated in an earlier response that the ministry is taking the matter for further regulatory decisions.
“We are aware that people are being tortured through unregulated loans. We are going to come up with a solution,” he stated, without hinting on a clear format on how it can be done, outside reaffirming the wider cadre for non-bank loans.
He stated that the issuance of loans is administered by financial institutions as per the Banking and Financial Institution Act 2006 and the Microfinance Act 2018, whose regulations were issued via notice on 13th September 2019, titled ‘Licence to conduct microfinance business,” issued under Section 21 of the Microfinance Act of 2018.
“In recent years, there have emerged people who are forming unlicensed lending schemes by extending loans to people. People who are well-off have been lending people money on unfavourable conditions,” he asserted.
The Microfinance Act provides for extending loans for repayment on a monthly loans at an interest rate that doesn’t exceed 3.5 percent, he said, elaborating that there are repaid on a monthly basis, after three months, six months, 12 months or 18 month. “The matter needs to be revisited,” he stated.
The MP has scathed a number of mobile cash transfer operators for bonding with such lenders in the promotion and issuance of loans that at the end lead borrowers into trouble, their belongings seized.
“Such loans are being issued at an interest rate that tops 80 percent. Most of the loans are required to be paid on a weekly basis and some of them are paid on a daily basis. People are losing their wealth in repaying the loans,” the opposition MP thundered.
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