COMMERCIAL banks lending rates are unlikely to drop in tandem with the Central Banks rates until reforms in the other sectors especially the Judiciary are firmly in place, Treasury PS Joseph Kinyua said yesterday.
He said reforms in the judiciary will ease resolution of commercial disputes involving collateral and eliminate the high cost of borrowing which currently factors in the high risk of non performing loans.
"We are seeing positive gains in reforming the Judiciary to solve commercial disputes quicker, and that will go a long way to address interest rates without fear of non commercial risks," said Kinyua.
He was speaking during the signing of a $7.5 million (Sh600 million ) credit facility to four deposit taking micro-finance organisations for onward lending to rural based entrepreneurs.
The facility under Rural Outreach Financial Innovations and Technologies is targeting enterprises involved in agricultural value chain with short term capital. The Kenya Women Finance Trust will handle Sh205 million and Faulu Kenya Sh200 million, while their smaller counterparts SMEP and Rafiki will receive Sh100 million and 94 million respectively.
The facility has a ten year repayment period at five per cent annually, but the banks will lend to their clients at varied rates depending on the risk factors they face in the areas they operate.
"It is expected that this facility will enable the DTMs reach more than 135,000 Kenyans over the next four years," said Kinyua. According to Kinyua, the four DTMs were selected after a competitive process.