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    Price of bread rises to Ksh55

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    Kenyan Passport among the most powerful in Africa

    Pesalink appoints Gituku Kirika as CEO

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    6.5 million register new mobile money accounts in 2020 -CBK

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    Hospitality Industry Players Eyeing MICE for Business Revival

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  • Markets
    Price of bread rises to Ksh55

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    Samsung Galaxy S21 is now out,pre orders open in Kenya

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    Brace for harsh times as fuel pump price hikes

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    6.5 million register new mobile money accounts in 2020 -CBK

    6.5 million register new mobile money accounts in 2020 -CBK

    KRA wins Kshs 105.6 million case against Mars Logistics Limited

    KRA wins Kshs 105.6 million case against Mars Logistics Limited

    Hospitality Industry Players Eyeing MICE for Business Revival

    Hospitality Industry Players Eyeing MICE for Business Revival

    SIB banks’ foreign investment arm records mild drop in returns

    SIB banks’ foreign investment arm records mild drop in returns

    45 year old Mutuku Wins Sportpesa Midweek Jackpot

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    Cytonn Real Estate completes The Alma Phase 3; 120 units set for handover

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    Pesalink appoints Gituku Kirika as CEO

    Pesalink appoints Gituku Kirika as CEO

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    Government cancels appointments for passport applications

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    ‘Beware of fake currency’, CBK Warns

    Diaspora remittances rose by 11 per cent to Sh341 billion in 2020 – CBK

    Samsung Galaxy S21 is now out,pre orders open in Kenya

    Samsung Galaxy S21 is now out,pre orders open in Kenya

    Brace for harsh times as fuel pump price hikes

    Brace for harsh times as fuel pump price hikes

    6.5 million register new mobile money accounts in 2020 -CBK

    6.5 million register new mobile money accounts in 2020 -CBK

    KRA wins Kshs 105.6 million case against Mars Logistics Limited

    KRA wins Kshs 105.6 million case against Mars Logistics Limited

    Hospitality Industry Players Eyeing MICE for Business Revival

    Hospitality Industry Players Eyeing MICE for Business Revival

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    SIB banks’ foreign investment arm records mild drop in returns

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    45 year old Mutuku Wins Sportpesa Midweek Jackpot

    • Agribusiness
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      ‘Beware of fake currency’, CBK Warns

      Diaspora remittances rose by 11 per cent to Sh341 billion in 2020 – CBK

      6.5 million register new mobile money accounts in 2020 -CBK

      6.5 million register new mobile money accounts in 2020 -CBK

      SIB banks’ foreign investment arm records mild drop in returns

      SIB banks’ foreign investment arm records mild drop in returns

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Kenyan Business Feed
  • Home
  • News
    Price of bread rises to Ksh55

    Price of bread rises to Ksh55

    Injustice 5 years on, haunts Safaricom killer director

    Injustice 5 years on, haunts Safaricom killer director

    Government cancels appointments for passport applications

    Kenyan Passport among the most powerful in Africa

    Pesalink appoints Gituku Kirika as CEO

    Pesalink appoints Gituku Kirika as CEO

    Samsung Galaxy S21 is now out,pre orders open in Kenya

    Samsung Galaxy S21 is now out,pre orders open in Kenya

    Brace for harsh times as fuel pump price hikes

    Brace for harsh times as fuel pump price hikes

    6.5 million register new mobile money accounts in 2020 -CBK

    6.5 million register new mobile money accounts in 2020 -CBK

    KRA wins Kshs 105.6 million case against Mars Logistics Limited

    KRA wins Kshs 105.6 million case against Mars Logistics Limited

    Hospitality Industry Players Eyeing MICE for Business Revival

    Hospitality Industry Players Eyeing MICE for Business Revival

  • Markets
    Price of bread rises to Ksh55

    Price of bread rises to Ksh55

    Samsung Galaxy S21 is now out,pre orders open in Kenya

    Samsung Galaxy S21 is now out,pre orders open in Kenya

    Brace for harsh times as fuel pump price hikes

    Brace for harsh times as fuel pump price hikes

    6.5 million register new mobile money accounts in 2020 -CBK

    6.5 million register new mobile money accounts in 2020 -CBK

    KRA wins Kshs 105.6 million case against Mars Logistics Limited

    KRA wins Kshs 105.6 million case against Mars Logistics Limited

    Hospitality Industry Players Eyeing MICE for Business Revival

    Hospitality Industry Players Eyeing MICE for Business Revival

    SIB banks’ foreign investment arm records mild drop in returns

    SIB banks’ foreign investment arm records mild drop in returns

    45 year old Mutuku Wins Sportpesa Midweek Jackpot

    45 year old Mutuku Wins Sportpesa Midweek Jackpot

    Emirates slashes air tickets for Kenyans

    Emirates slashes air tickets for Kenyans

  • Real Estate
    National Bank and Octagon ink 100 billion service partnership

    National Bank and Octagon ink 100 billion service partnership

    Real Estate: Cytonn invites bids for this 4 acre piece of prime land in Kilimani

    Mizizi Africa Homes voted best low cost housing developer 2020

    Mizizi Africa Homes voted best low cost housing developer 2020

    Cytonn Hands Over Phase III of Comprehensive-Lifestyle Project, The Alma

    Cytonn Hands Over Phase III of Comprehensive-Lifestyle Project, The Alma

    32% of Kenyans to change houses over Covid-19

    32% of Kenyans to change houses over Covid-19

    Kenyan Firm awarded Most Innovative Community Developer 

    Cytonn Real Estate completes The Alma Phase 3; 120 units set for handover

    Serviced Apartments Record Decline in Rental Yields

    Serviced Apartments Record Decline in Rental Yields

    Moad Capital, leading the homes of the future

    Moad Capital, leading the homes of the future

    Mount Kenya region has lucrative retail rental yield – Cytonn

  • Tech
    Pesalink appoints Gituku Kirika as CEO

    Pesalink appoints Gituku Kirika as CEO

    Samsung Galaxy S21 is now out,pre orders open in Kenya

    Samsung Galaxy S21 is now out,pre orders open in Kenya

    realme C12 and 7i now Available In Kenya

    2021: realme to release more smartphone in Kenya

    Samsung banking on technology personalisation to increase market share

    Samsung banking on technology personalisation to increase market share

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    Millions Abandon Whatsapp over new Contentious Policy, Signal, Telegram record growth

    Millions Abandon Whatsapp over new Contentious Policy, Signal, Telegram record growth

    Whatsapp to block users this February following new policy

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    Tough times ahead as taxis set to increase fares

    Tough times ahead as taxis set to increase fares

    vivo V20 now in Kenya, with 44MP selfie Camera

    vivo V20 now in Kenya, with 44MP selfie Camera

  • World Business

    Twitter CEO finally breaks silence about banning US President Donald Trump from the platform

    Millions Abandon Whatsapp over new Contentious Policy, Signal, Telegram record growth

    Millions Abandon Whatsapp over new Contentious Policy, Signal, Telegram record growth

    Trump threatens to slash US funding to World Health Organization

    A year later, WHO still insists on visiting China to probe virus origin

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    Boeing’s 737 Max Cleared to Fly in the US After Crashes

    Boeing’s 737 Max Cleared to Fly in the US After Crashes

    Guinness forced to recall contaminated brand

    Guinness forced to recall contaminated brand

    WTA Names Kenya as Africa’s Leading Tourist Destination 2020

    WTA Names Kenya as Africa’s Leading Tourist Destination 2020

    United States: Close Contest as Trump Declares himself Winner

    United States: Close Contest as Trump Declares himself Winner

    Terror group Al-Shabaab collects almost as much tax as the Somalia government – Report

    Terror group Al-Shabaab collects almost as much tax as the Somalia government – Report

  • KBF
    • All
    • Agribusiness
    • Banking
    • Insurance
    • Manufacturing
    • Opinion
    Government cancels appointments for passport applications

    Kenyan Passport among the most powerful in Africa

    ‘Beware of fake currency’, CBK Warns

    Diaspora remittances rose by 11 per cent to Sh341 billion in 2020 – CBK

    Samsung Galaxy S21 is now out,pre orders open in Kenya

    Samsung Galaxy S21 is now out,pre orders open in Kenya

    Brace for harsh times as fuel pump price hikes

    Brace for harsh times as fuel pump price hikes

    6.5 million register new mobile money accounts in 2020 -CBK

    6.5 million register new mobile money accounts in 2020 -CBK

    KRA wins Kshs 105.6 million case against Mars Logistics Limited

    KRA wins Kshs 105.6 million case against Mars Logistics Limited

    Hospitality Industry Players Eyeing MICE for Business Revival

    Hospitality Industry Players Eyeing MICE for Business Revival

    SIB banks’ foreign investment arm records mild drop in returns

    SIB banks’ foreign investment arm records mild drop in returns

    45 year old Mutuku Wins Sportpesa Midweek Jackpot

    45 year old Mutuku Wins Sportpesa Midweek Jackpot

    • Agribusiness
    • Banking
      ‘Beware of fake currency’, CBK Warns

      Diaspora remittances rose by 11 per cent to Sh341 billion in 2020 – CBK

      6.5 million register new mobile money accounts in 2020 -CBK

      6.5 million register new mobile money accounts in 2020 -CBK

      SIB banks’ foreign investment arm records mild drop in returns

      SIB banks’ foreign investment arm records mild drop in returns

      DTB issues profit warning

      DTB issues profit warning

      How to join, get a loan from Metropolitan Sacco

      Stanbic Bank systems down over Christmas period

      Equity Restructures Ksh92 Billion Loans To cushion Customers Against COVID-19

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      Equity Group Appoints Christopher Newson as Non-Executive Director

      Equity Group Appoints Christopher Newson as Non-Executive Director

      How To Get Advance Salary Loan Via Co-operative Bank On Your Phone

      Co-operative Bank Launches Global Money Transfer Service

    • Insurance
      ICEA Lion Life appoints a new CEO

      ICEA Lion Life appoints a new CEO

      Exposed: Insurance Company on The Spot for Fruatrating clients

      Exposed: Insurance Company on The Spot for Fruatrating clients

      Octagon feted in 2020 World Pension Summit Innovation Awards

      Octagon feted in 2020 World Pension Summit Innovation Awards

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      DIB Awarded Best Islamic Bank in Kenya

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    • Manufacturing
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      OPINION: Managing the end-of-life of products to accelerate a circular economy in Kenya

      OPINION: Managing the end-of-life of products to accelerate a circular economy in Kenya

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      Why Digital Services Tax is a retrogressive policy

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      OPINION: Conserve Nature Even as you Work to Achieve SDGs

      OPINION: Conserve Nature Even as you Work to Achieve SDGs

      Crisis as young Kenyans now embrace Crime as lifestyle

      Crisis as young Kenyans now embrace Crime as lifestyle

      Employment Exit Strategy: The smart way to leave job for entrepreneurship.

      Employment Exit Strategy: The smart way to leave job for entrepreneurship.

      OPINION: Why Amina Mohammed’s Push to Head WTO is ill-timed

      OPINION: Why Amina Mohammed’s Push to Head WTO is ill-timed

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CBK Retains Lending Rate At 9% Due To Strong Economy

by Montui
July 15, 2019
in KBF
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Patrick Njoroge, Governor of Central Bank of Kenya

A brief History of Interest Rate Cap

The interest capping law became operational on September 14, 2016. It was implemented following concerns raised by the public regarding the high cost of credit in Kenya, which was viewed as a hindrance to credit access by a large segment of the population. Implementation of the law, was therefore, expected to lower the cost of credit and increase access to credit.

This was the case in some sectors but many Kenyans suffered due to banks lowering their lending appetite for the common mwananchi.

Lending to people and micro-small and medium enterprises (MSMEs) reduced drastically, even as this sections were forced to compete with government, which had increased its domestic borrowing.

For the above and more reasons, Members of parliament (MPs) urged by President Kenyatta sought to scrap the rate cap, but the High Court on 14th March, 2019, ruled that the interest rate cap though unconstitutional  should be re-examined. The High court gave the National Assembly 12 months to re-examine the law.

Central bank of Kenya (CBK) noted these and at the end of March (when the Monetary Policy Committee – MPC seats) stated:

The Committee noted the High Court ruling on March 14, 2019, relating to interest rate caps under Section 33B of the Banking Act. Nevertheless, the Committee stressed that interest rate caps severely constrain the formulation, conduct and effectiveness of monetary policy. Further, these interest rate caps have hampered access to credit by growth sectors, particularly MSMEs.

After the rate cap in 2016, banks were to only charge 4 % above the Central Bank Rate (CBR).

The Monetary Policy Committee (MPC) which often meets to review the outcome of its previous policy decisions and recent economic developments, met today to discus and decide on the new Central Bank Rate (CBR).

The MPC decided to retain the CBR at 9%. This has been the case for six months now.

Below is their report their report in Full Text:

GOVERNOR

BANKI KUU YA KENYA

CENTRAL BANK OF KENYA

Haile Selassie Avenue P. 0. Box 60000-00200 Nairobi, Kenya Telephone: 286100324 Fax: 2716556

PRESS RELEASE

MONETARY POLICY COMMITTEE MEETING

The Monetary Policy Committee (MPC) met on May 27, 2019, to review the outcome of its previous policy decisions and recent economic developments. The meeting was held against a backdrop of domestic macroeconomic stability, sustained optimism on the economic growth prospects, improving weather conditions in most parts of the country and increased uncertainties in the global financial markets.

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  • Month-on-month overall inflation remained within the target range in March and April 2019. The inflation rate stood at 6.6 percent in April compared to 4.4 percent in March, mainly reflecting increases in food prices attributed to depressed supply of vegetables and other fast-growing food crops following the delayed onset of the long rains. Food inflation rose to 7.7 percent in April from 2.9 percent in March. However, non-food-non-fuel (NFNF) inflation remained below 5 percent, indicating that demand pressures and the spillovers of the rise in food and fuel prices were muted. Overall inflation is expected to remain within the target range in the near term largely due to expectations of lower food prices following improving weather conditions, and lower electricity prices with the reduced usage of expensive power sources. Additionally, a timely release of maize stocks from the Strategic Grain Reserve will support the stability of food prices.
  • The foreign exchange market has remained stable supported by the narrowing of the current account deficit to 4.5 percent of GDP in the 12 months to April 2019 from 5.5 percent in April 2018. This reflects resilient performance of exports particularly horticulture and coffee, strong diaspora remittances, and higher receipts from tourism and transport services. Additionally, growth in imports slowed mainly due to lower imports of food. The current account deficit is expected to narrow to 4.8 percent of GDP in 2019 from 5.0 percent in 2018.
  • The Government successfully issued a USD2.1 billion Eurobond in May, with a performance rate of 452 percent and favourable pricing. This reaffirmed investors’ confidence in the Kenyan economy. Consequently, foreign exchange reserves rose to an all-time high of USD10,056 million (6.4 months of import cover), and continue to provide adequate cover and a buffer against short-term shocks in the foreign exchange market.
  • Private sector credit grew by 4.9 percent in the 12 months to April, compared to 4.3 percent in March. Strong growth in credit to the private sector was observed in the following sectors: manufacturing (7.9 percent); trade (8.4 percent); finance and insurance (13.3 percent); and consumer durables (16.4 percent). Private sector credit growth is expected to continue to strengthen in the remainder of 2019.
  • The Committee noted the rollout of innovative credit products, particularly those targeting Micro Small and Medium Enterprises (MSMEs). These products are expected to drive lending to this sector which has previously been constrained of credit. The Committee looks forward to an assessment of the initial impact of these products.
  • The banking sector remains stable and resilient. Average commercial banks’ liquidity and capital adequacy ratios stood at 51.0 percent and 18.3 percent, respectively, in April. The ratio of gross non-performing loans (NPLs) to gross loans stood at 12.9 percent in April compared to 12.8 percent in February, reflecting increases in NPLs mainly in the personal/household, real estate and manufacturing sectors. Banks have continued with mitigation measures, including enhanced recovery efforts. Additionally, prompt settlement of delayed payments by government and private sector entities will curtail a further increase in NPLs and support economic growth.
  • The economy recovered strongly in 2018, with real GDP growth increasing to 6.3 percent from 4.9 percent in 2017. This reflected a strong recovery in agriculture, manufacturing, and a buoyant services sector, particularly trade, information and communication, accommodation and restaurants, transport and storage, and finance and insurance. Leading indicators of economic activity show that growth remained resilient in the first quarter of 2019, despite the delayed onset of the long rains. Growth in 2019 is expected to be supported by agricultural production, robust growth of MSMEs and the service sector, increased foreign direct investment and a stable macroeconomic environment. Additionally, the continued alignment of Government spending to the Big 4 priority sectors is expected to boost economic activity in manufacturing, agriculture, construction and real estate, and health sectors.
  • The MPC Private Sector Market Perception Survey conducted in May 2019 indicated that inflation expectations remained well anchored within the target range, with expectations of lower food prices following improved weather conditions, and the stability in the exchange rate. The Survey also showed sustained optimism that economic growth would remain strong in 2019 due to, among other factors, ongoing public infrastructure investments, implementation of the Big 4 projects by the Government, expected growth in tourism, a stable macroeconomic environment and improved investor confidence in the economy. However, the optimism was tempered by the rise in international oil prices, risk of insufficient long rains and concerns on the likely implications of global developments on Kenya’s exports.
  • Global growth is expected to slow down in 2019, largely due to the escalation of trade tensions between the U.S. and China, increased uncertainties over the nature of Brexit, and the pace of normalization of monetary policy in the advanced economies. These developments may result in increased volatility in the global financial markets.

The Committee noted that inflation expectations remained well anchored within the target range, but there is need to remain vigilant on possible spillovers of recent food and fuel price increases. The Committee further noted that the economy was operating close to its potential. The MPC concluded that the current policy stance remains appropriate, and will continue to monitor any perverse response to its previous decisions. The Committee therefore decided to retain the CBR at 9.00 percent.

The MPC will continue to closely monitor developments in the global and domestic economy, and stands ready to take additional measures as necessary.

Dr. Patrick Njoroge CHAIRMAN, MONETARY POLICY COMMITTEE, May 27, 2019


Kenyan Business Feed is the top Kenyan Business Blog. We share news from Kenya and across the region. To contact us with any alert, please email us to [email protected]

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