Interest on risky loans forecast at 16pc after cap removal

High-risk borrowers like individuals and small businesses face an increase in loan rates of up to three percentage points following the removal of the legal cap on commercial lending charges, according to KCB  chief executive Joshua Oigara.

Mr Oigara, the head of Kenya’s largest bank by asset size— Wednesday said removal of the cap will ease lending to the small businesses, but forecast that their interest rate will increase to between 15 percent and 16 percent, up from the current 13 percent.

President Uhuru Kenyatta’s bid to remove a cap on commercial lending rates was passed in Parliament on Tuesday following a quorum hitch, potentially boosting the flow of credit to the economy and return of expensive credit.

Mr Oigara reckons that lending rates are unlikely to breach the 20 percent interest rate level—which prevailed ahead of introduction of rate caps in September 2016.

“Banks are ready to lend. So we are going to see more people including SMEs start accessing credit in the industry. Customers with high-risk profiles may see a 2-3% increase,” Mr Oigara said in a statement yesterday.