- The government could do well to explain the inability of its affirmative, low interest funds to extend credit to the needy business segments.
- But within the industry, it is not certain that broadening the lending margins will yield more private sector borrowing.
Although Parliament has technically passed the law ending interest rate caps, uncertainty remains whether this will be the magic bullet that unlocks the inertia that has left small businesses struggling to stay afloat.
Getting consistent data on the impact the rate caps that came into force in 2016 have had on small businesses has been difficult. They kicked in when the economy was on a downward spiral due to drought.
In between, there was a pick-up in credit by the private sector, prompting eureka comments from some analysts that the rates were achieving the desired end.
The entry of mobile-based money lending, digital loans, most at usury levels, however opened policymakers to the dearth of credit at the lower end of the market as products such as Fuliza recorded unprecedented success to hit Sh140 billion in nine months.
In his memorandum to Parliament seeking removal of the caps, President Kenyatta said requiring banks to lend at less than 14 per cent and mobilise deposits at about seven per cent had left riskier sections of borrowers at the mercy of shylocks.
But he also took the populist path, arguing that removing the caps means more credit, in a bid to win public support for a reversal, which in ordinary circumstances would have provoked outrage.