Interest-Caps: This week saw the end of the era of capping of interest rates, that was seen as a populist three-year experiment to reign in large banking-sector profits.

President Uhuru Kenyatta this morning at State House, Nairobi signed into law the Finance Bill 2019. The Finance Act 2019, among other provision, repeals section 33b of the Banking Act that provides for the capping of bank interest rates. pic.twitter.com/LjN7sEC4n5

— State House Kenya (@StateHouseKenya) November 7, 2019

The Government had tried to repeal this, without success, several times over the last few years, and bankers and the IMF have also been vocal about the unintended, and detrimental effects of the caps, on the economy.

Parliament stuck to its guns to the last minute, making farcical attempts to keep the caps in place. But as only 161 MP’s were present to vote, they could not proceed to over-ride the President, as they needed 2/3 of Parliament to be present. While some lawmakers have in the past argued that this high constitutional threshold (of requiring a vote of 233 MP’s) gives the President power to make laws, this has been upheld by the Courts.

People are now borrowing 5% per week. I said you cannot equate the risk of micro-businesses with that of government and I hope, if parliament does a repeal, those people will come back and find it better paying 18%, as they were before the caps – J. Mwangi #EquityHYResults

— Bankelele (@bankelele) August 16, 2018

The caps did not stop the “super profits” at large banks, but they did weaken smaller banks by limiting their interest-income growth. In the interest capped era, large banks found shifted their lending lend to a national government with an insatiable borrowing appetite, as opposed to small businesses, and when these credit lines shut off, small banks were hit with a rise of non-performing loans.

Stawi: This week also saw the formal launch of Stawi after a pilot phase in which that 80,000 had signed up for this banking industry response to the mushrooming of unregulated loan apps.

Stawi aims to promote savings and lending for small businesses. It is a bank account, opened and operated on phone, and owners can move money through M-pesa (for a flat fee of Kshs 42) and Pesalink. Stawi is hosted by the Commercial Bank of Africa, and, like with its M-shwari product, banking services are only rendered on the app, not at branches.

Users of Stawi have to be registered and in business for six months. New users are encouraged to make Stawi their primary account and to channel transactions through it to get a borrowing limit.

On downloading the app, one is assigned a loan limit based on credit their credit history. Stawi offers unsecured loans of between (~$292) KSh30,000 to (~$2,432) KSh250,000 that can be repaid between one to twelve months at rates of 9% per year.