CAP­PING DE­BATE

The East African - - NEWS -

The in­ter­est rate cap­ping de­bate in Kenya be­gan in 2001 fol­low­ing con­cerns over the high cost of credit and in­ter­est rate spreads. In 2001 a Bill was in­tro­duced in Par­lia­ment propos­ing to fix com­mer­cial banks in­ter­est rates to the 91-day Trea­sury-bill rate as Cen­tral Bank did not have a base rate at the time. The se­cond at­tempt in 2013 called for rates to be capped con­sis­tent with the Cen­tral Bank Rate. Both at­tempts failed largely on the strength of the ar­gu­ments for free mar­ket in­ter­est rate struc­ture and the banks were al­lowed to reg­u­late them­selves in terms of de­sign­ing mea­sures to­wards lower cost of credit.

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