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The interest rates capping law sailed through the Second reading yesterday in the National Assembly after amendments were introduced to redraft sections of the Banking Act 2016 that were declared to be “vague, imprecise, ambiguous and indefinite” by the High Court.

The debate, which commenced yesterday, is an attempt to save the capping law following the High Court directive the contested sections of the law be redrafted by March 2020.

Justices Francis Tuiyot, Jacqueline Kamau and Rachel Ngetich had in March declared Section 33 (B) (1) and (2) of the Banking Act unconstitutional, a move which was followed by an order to the National Assembly to amend the anomalies in one year or interest caps are scrapped.

The debate touched on the house’s inability to define key technical words – credit facility’ and the ‘Central Bank Rate’ (CBR) – used in the interest rates control law which is said to have made the legislation ambiguous, hence unconstitutional, according to the High Court.

Jail terms

The amendments also seek to introduce fines of up to Sh1 million or one year jail terms on borrowers who accept loans offered above the statutory interest rate ceiling, currently at 13 per cent.

But they require a third and final reading before MPs vote, which if passed, the amendments will then be presented to President Uhuru Kenyatta for assent before they become law.

During the debate, the originator of the Bill, Jude Njomo, highlighted expected changes. 

“The main reason for this amendment is to bring clarity, and this is actually a technical issue,” he said, adding: “We have done the necessary corrections that are required by law.”

In the March ruling on a petition filed by a Mr Boniface Oduor, the High Court warned that any word or words with the potential of causing confusion must be clearly defined.

“The Legislature should not assume that the meaning of material words can be inferred. It must make it easy for everyone, including a lay person, to understand the meaning of a provision.

In our view, Section 33B lacks the minimum degree of certainty that is required of legislation that creates criminal offences,” the judges had stated in March.

Benchmark rate

The interest rate cap was signed into law in September 2016 capping commercial bank lending rates at four percentage points above the Central Bank’s benchmark rate.

The move has since inhibited the SMEs from accessing credit which is critical to their growth and expansion.