The Central Bank of Kenya (CBK) is once again talking tough about the contentious issue of the cost of loans since the scrapping of the law capping interest on loans last November, which paved the way for the lenders to determine rates for the money individuals and businesses borrow.
The about-turn on the regulated lending environment was as a result of concerted and multi-pronged pressure from the banks, the Treasury as well as the International Monetary Fund as well as the CBK.
The argument was that the lenders opted for secure government lending and avoided businesses to cut risks related to defaults on loans. The banks have pledged to avoid predatory lending associated with pre-interest capping era, which saw rates rising to as high as 25 percent.
However, the banks are still withholding their money, denying businesses much-needed capital injection.
On Monday, the Monetary Policy Committee reduced the benchmark lending rate to 8.25 percent from 8.50 percent setting the stage for lower interest rates.
The CBK has promised to act on banks imposing higher lending rates. However, the banking regulator should not only talk tough but take deterrent action against errant banks.