MPs failed to raise the requisite two-thirds majority required to veto President Uhuru Kenyatta’s decision to reject the cap on interest rates in the Finance Bill, 2019 during a chaotic session at the National Assembly on Tuesday.
A total of 233 members were needed to shoot down Uhuru’s demands but only 161 members were present during the session meaning that an amendment to the law can only be introduced in the house after six months.
Temporary Deputy Speaker, Laikipia West MP Patrick Mariru was forced to preside over the session while standing as MPs opposed to the scrapping of the cap became unruly.
The National Assembly Committee on Finance and Planning had adopted Uhuru’s recommendations which give banks the leeway to gang up and set interest rates as they please.
Two weeks ago, President Kenyatta returned the Finance Bill, 2019 to parliament recommending that MPs remove the rate cap provision stating that the law had had a negative impact on the economy.
The law passed in 2016 caps interest loans at 4 points above the Central Bank of Kenya (CBK) base lending rate which stands at 9% at the moment, the consequence has been that banks have been lending out to low-risk business entities and shunning Small and Medium Enterprises (SMEs).
SMEs which are deemed to be high risk have been forced to borrow from Microfinance institutions at even higher rates.
Central Bank of Kenya (CBK) Governor Dr. Patrick Njoroge is also on record faulting the law saying it has had created a credit squeeze in the economy.
See also: Bankers Rally Behind Ruling on Interest Rates
Legislators across the political divide were backers of the Kiambu Town MP Jude Njomo sponsored law but state operatives advancing the president’s interests made sure that the cap was defeated through lobbying legislators.