After a law was passed to penalize banks and CEO’s who charge interest rates above the stipulated rate, now the architect of the interest cap law, legislator Jude Njomo, is now going for customers.
According to the Business Daily, the MP wants the law amended to include borrowers who will also pay a Sh1 million fine or spend up to a year in jail if they borrow above the lending rates, if the amendment is passed by parliament.
Njomo argued that the current section of the law that seeks to enforce the rate cap is discriminatory.
“As it stands, the penal provision under subsection (3) is couched in discriminatory terms as it applies only to banks and financial institutions yet the legal obligation is aimed at both the bank/financial institution and the borrower/customer… amendment) is therefore necessary as it seeks to create a penal provision that is not discriminatory,” Mr Njomo said in the memo attached to the bill.
The proposed amendment comes weeks after Treasury joined the Central Bank of Kenya in advocating for the removal of interest rate caps which was introduced in September 2016 to bring down the cost of borrowing.
But as CBK and IMF warned, the rate cap has squeezed out the private sector with credit to businesses expanding by 5.2 percent against a target of 12 percent.
Intentions to push for the repeal of the interest rate cap law have been met by resistance from legislators.