The Accountant Sep-Oct-2016
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COVER STORY<br />
CAPPING OF<br />
INTEREST RATES<br />
<strong>The</strong> way forward<br />
By FCPA Fernandes Barasa<br />
President Uhuru Kenyatta’s<br />
signature on the Banking<br />
Amendment Bill this week<br />
on Wednesday was a major<br />
milestone in Kenya’s financial<br />
sector. <strong>The</strong> Institute of Certified Public<br />
<strong>Accountant</strong>s of Kenya commends the<br />
President for this gesture.<br />
Secondly, the Institute is pleased to<br />
note that the Head of State has vindicated<br />
our earlier position on capping of interest<br />
rates. It is apparent that the banking sector<br />
has been operating on an oligopolistic<br />
market mode, where credit pricing is<br />
not reflective of market fundamentals<br />
and thereby disadvantaging majority of<br />
consumers of banking services.<br />
<strong>The</strong> new law opens up a new world<br />
of possibilities for Kenyan bank services<br />
consumers. Setting lower caps on interest<br />
would provide a conducive environment to<br />
all.<br />
As the Government prepares to<br />
implement the new law in coming weeks,<br />
we urge the policy makers to consider the<br />
following proposals:<br />
a. It is critical that the government deals<br />
with its growing appetite for domestic debt<br />
and focus on negotiating cheaper loans<br />
from external markets to avoid crowding<br />
the private sector out of the domestic<br />
market.<br />
b. <strong>The</strong> National Assembly needs to relook<br />
this Bill or generate a new Bill that will<br />
deal with the same issues under micro<br />
finance, shylocks and SACCOs or provide<br />
an alternative for vulnerable groups that<br />
the Bill intended to protect.<br />
c. Parliament needs to address the issue<br />
of capping other banking charges such<br />
as transactional cost and insurance. This<br />
might be used as pathway to compensate<br />
for the lost opportunities under interest<br />
rate capping law.<br />
d. Parliament has a duty to cushion<br />
users of mobile banking services against<br />
unregulated interest rates if the spirit of<br />
interest rate capping is anything to go by.<br />
e. <strong>The</strong> Institute requests the President<br />
consider launching the long-awaited<br />
M-Akiba Treasury Bond facility to allow<br />
ordinary Kenyans to finance government<br />
borrowing through mobile banking as low<br />
Kshs 3,000.<br />
Once again we appreciate the<br />
President’s gesture and believe that the<br />
stakeholders will embrace these reforms<br />
whole-heartedly.<br />
2. Employment of Schools<br />
Bursars<br />
<strong>The</strong> Institute lauds the planned<br />
employment and deployment of bursars<br />
in public institutions by the Ministry of<br />
Education. We are in total support of<br />
this plan which if well implemented will<br />
go along in ensuring proper utilization<br />
of public resources in our schools. As<br />
you may be aware, education has become<br />
38 SEPTEMBER - OCTOBER <strong>2016</strong>