Kenya could modify or scrap a law that caps commercial lending rates, President Uhuru Kenyatta said on Tuesday.
He recognised that access to credit for small and medium enterprises (SMEs) had dried up as a consequence.
Kenya capped commercial lending rates in September 2016 at four percentage points above the central bank’s benchmark rate, which now stands at 9.5 per cent, in an attempt to limit the cost of borrowing for businesses and individuals.
Although the aim was to help small traders access capital at affordable rates, the cap had the opposite effect, as lenders deemed SMEs too risky to lend to, saying they could not price risk properly while the cap was in place.
“We have learned our lessons … we recognise the limitations of the law in the way it is currently structured,” Uhuru said in a speech at London think-tank Chatham House.
“We recognise there is a need to repeal it altogether or modify it to deal with some of the issues and the concerns that have been raised, especially from the financial sector.”