The issue of interest rates was clarified by Central Bank

Editor, RE: “MPs question why new banking law is silent on interest rates” (The New Times, November 16). I admire the vocal dynamism of the Members of Parliament. But I can’t help but think that their time would be better spent if they had private consultations on issues, economic or otherwise before engaging in legislative debate. The issue of interest rate control is a ripple effect of Kenya’s recent cap of interest rates at 4 percentage points above CBK’s interest rate currently at 10%. Interest rates essentially represent cost of funds, profit and risk provision. The biggest element of interest rates is obviously the cost of funds. Kenya has the benefit of a relatively big economy, at least in comparison to Rwanda which is 8 times smaller from a GDP perspective. The Kenyan market is highly liquid, with cheaper funds—a considerable amount of both corporate funds and personal savings contribute to this—where as the majority of Rwandan banks depend on borrowed money with volatile rates from both local and international entities to provide loans to the local consumer. I believe this point has been reiterated several times by both the Minister of Finance and the Governor of BNR (Central Bank). Is it possible to cap Rwandan interest rates? Yes, but for now it can only be within the current cost of funds parameters. Promotion of savings while creating an environment for new players in the financial sector is a feasible alternative. Barrington Levi

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The issue of interest rates was clarified by Central Bank