Updated Tue, September 6th 2016 at 00:00 GMT +3NAIROBI: The Government’s appetite for domestic loans is a huge threat to the success of the law capping interest rates. According to investment firm Cytonn Investments, the State will still borrow heavily from the domestic market, crowding out the private sector as lenders rush for low-risk Government securities. Banks and financial institutions are also required to give a minimum interest rate of 70 per cent of base rate on depositors’ savings, a move that slashes the high interest rate spread enjoyed by lenders. Nkukuu said the Government should have tried to make the banking sector more competitive by strengthening other financial sector institutions, such as Saccos and investment banks. “They should have come up with more products that could compete with the banking sector because, yes, there could be collusion in the banking sector,” she said, adding that market forces should not be limited to just banking but to the larger financial sector.

Source: Standard Digital September 05, 2016 19:52 UTC