24 April 2012

Kenya: Bankers Deny Bribing MPs Over Finance Bill

The Kenya Bankers Association has denied reports that it bribed Members of Parliament so that they could vote out a bill meant to fix interest rates.

The banking industry representative, in a newspaper advert, said it had not used any unethical practices to induce the MPs to vote against the proposed amendment to the Finance Bill as they did last week.

This follows allegations that KBA together with the finance minister, Njeru Githae, hosted a luncheon for the parliamentarians and gave them Sh50, 000 each which led to the no vote.

Commercial banks have been opposed to a change in the Finance Bill 2011 that sought to cap the interest rates and charge on loans at no more than 4 per cent of the Central Bank Rate.

"KBA wishes to inform members of public that at no time did the KBA host the aforementioned lunch nor was the association in attendance....KBA did not offer to pay or pay any money to Members of Parliament," said Habil Olaka, the KBA chief executive.

The Finance Bill 2011 was supposed to have been passed by end of last December but fears that MPs would amend it to fix the interest rates resulted to delays tactics by the Treasury as it sought to convince the law makers to drop the idea.

In order to alleviate the effects of high interest rates on customers, KBA, CBK and ministry of finance unveiled a package of short term actions in December 2011 which included extension of loan tenors, capping increase in loan repayment at 20 per cent and waiving of early repayment penalties.

Olaka said these actions have led to eased loan conditions for customers.

Supporters of the proposal to cap interest rates accuse commercial banks of making 'criminal' profits at the expense of customers.

Last year when the CBK increased the CBR, all banks hiked loan repayment rates several times, some charging as high as 30 per cent . Critics of the proposal say this is against the spirit of a free market economy.

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