MPs under pressure as vote on return of rate caps looms

Thursday, October 31st, 2019 09:00 | By
Kiambu Town MP Jude Njomo who sponsored the interest rates cap has vowed to ensure the presidential memo is defeated. PD/GERALD ITHANA

 By Anthony Mwangi and Mercy Mwai

National Assembly leadership is applying all tricks in the book to ensure a presidential memorandum seeking to overturn the Finance Bill proposal to scrap lending caps goes through, it has emerged.

People Daily learnt yesterday that members seeking to travel abroad were being cleared upon request as opposed to normal procedure which requires MPs to seek clearance from their committee chairpersons before the Speaker consents.

The significance of letting as many MPs as possible travel is to deny a group opposed to the presidential memorandum numbers to defeat it.

However, MPs opposed to the memorandum are determined to shoot it down and have formed a WhatsApp group to mobilise their colleagues.

Kiambu Town MP Jude Njomo, the man behind the rate capping law, said he had been asked to take a trip to the United States but he had turned down the offer.

“I was asked to travel to the USA for a trip I had applied for some time back but I turned down the offer. I must be in the House to fight for the common man by defeating the presidential memo,” he said.

Swiss Parliament

His Homa Bay Town counterpart Peter Kaluma said he had been asked to travel to Geneva (Switzerland) to familiarise himself with the operations of the Swiss Parliament.  “I outrightly rejected the bargain whose intention was to compromise me not to present my views on Tuesday when the House votes on the memorandum,” he told the People Daily.

The Constitution stipulates that if the President declines to assent to a bill, he must within 14 days submit to the Speaker of the National Assembly, a memorandum indicating the specific provisions of the bill which should be amended.

The MPs have an option of approving the bill in its original form. Should they resolve to approve the Financial Bill 2019 in its original form, it must be supported by not less than 65 per cent (233 members) of the National Assembly.

Leader of Majority Aden Duale said no leadership can allow a presidential memorandum to be defeated.

“We cannot let down the President; the memorandum will pass. I’m certain those opposed to it will not go beyond 50 members,” Duale said.

Alego Usonga MP Samuel Atandi said although he is opposed to the memorandum, it will be a difficult one to defeat.

“I do not think we will make the numbers; it is a bad move by the Jubilee administration to remove the interest caps,” he said.

“I’ m told the leadership has summoned chairmen and vice-chairmen of committees and ordered them to support and rally their members to support the bill; members are being offered trips and being told that they must submit reports within a certain period,” said Marakwet East MP Kangogo Bowen.

“We cannot allow banks to continue making abnormal profits. There is a narrative that SMEs are not getting loans. The problem is the government which has been borrowing heavily from the local market,” he said.

“President Uhuru must re-examine his position. As Parliament, we will vote with the conscience of every member,” said Chris Wamalwa (Kiminini).

“It has been the position of both the Leader of Majority and Minority that we don’t remove the cap. I don’t know if they have been spoken to and had a change of mind. As far as I am concerned, the position remains the same and the caps remain,” said Didmus Baraza (Kimilili).

 On Tuesday, a parliamentary committee moved to protect the rights of existing borrowers after it proposed amendments to the Finance Bill that if adopted by the House will ensure they will not be affected by the scrapping of the interest rate capping.

The Finance Committee chaired by Joseph Limo (Kipkelion East) agreed to support the presidential recommendation to do away with interest rates capping, but said there was need to protect borrowers from being affected until they clear existing loans. The committee has proposed a new amendment stating that any agreement or arrangement to borrow or lend which was made or entered into will continue to be in force on such terms including interest rates and for the duration specified in the agreement or arrangement.

 “The committee settled for the second option where they agreed to adopt the President’s reservations to clause 45 and made a further amendment to save the rights of existing borrowers,” read their report.

Unregulated lenders

Limo’s committee noted that the amendment will require only a simple majority to pass in the House, unlike other proposals including amending the bill as proposed by the President.

Last week, President Uhuru Kenyatta declined to approve the Finance Bill, 2019, and asked MPs to scrap commercial lending rate caps which have hugely reduced credit.

In his Memorandum, Uhuru highlighted several factors including reduction of credit to the private sector, particularly Micro, Small and Medium Enterprises (MSMEs), the decline in economic growth, the weakening of the effectiveness of Monetary Policy, the reduction of loan advances by banks and the mushrooming of shylocks and other unregulated lenders in the financial sector.

In 2016, the government imposed legal caps on lending rates at four percentage points above the Central Bank of Kenya’s benchmark, currently nine per cent — and put the maximum borrowing rate at 13 per cent.

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