Central Bank of Kenya (CBK) Governor Patrick Njoroge has said the regulator will enforce strict controls to ensure that banks avoid predatory lending, at a time when most lenders are still reluctant to extend credit to the private sector despite the removal of legal caps on cost of borrowing.
The CBK will be keen on enforcing the Kenya Banking Sector Charter to help free up access to affordable credit in a drive to raise lending to the private sector by double digits this year.
Dr Njoroge warned banks against overcharging borrowers, saying there was no room for a return to the pre-rate cap era that he described as the “Wild West”, when banks could charge interest rates as high as 25 percent.
“We do not expect after lifting of the caps that banks will go to the same old same old Wild West sort of manoeuvring,” Dr Njoroge warned. “We were doing lazy banking before; let’s give them the training so that they can move to the new environment”.
He said CBK had been working with each of the banks and in the context of the banking charter “and they have to come up with a plan and indeed even made presentations to us.” He spoke a day after the CBK’s Monetary Policy Committee (MPC) lowered its benchmark lending rate.
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