That the stakes were too high in the recently overdue debate on the Finance Bill 2011, especially on the issue of capping bank interest rates, could be an understatement since the country’s commercial financial institutions appeared hell bent to sabotage enactment of any law controlling the lending rates.It has since emerged that there was an alleged heavy hand of local financial institutions to bribe legislators to go soft on the area of capping interest rates levied by the commercial financial institutions.
The rates which are considered extremely prohibitive to borrowers initially had seen a majority of the legislators clamouring to legislate law that could control the rates that are hurting the financial market in the country to cushion borrowers.
But when the day arrived for them to exercise their parliamentary powers to have this law enacted to ensure that the commercial financial institutions did not manipulate the rates to suit their profit motivated interests, the law makers were on the spot for compromise.
The day of the debate began with intense lobbying by both sides of the divide. Phone text messages were sent to MPs inviting them to attend two separate lunch meetings. Bribery fears were later to be confirmed by nominated MP Millie Odhiambo during the late night debate.
This came just as majority of the MPs characteristically let their personal selfish gain override the public interest on a matter as serious as the issue of interest rates is in Kenya. No wonder that extortionist claims and counter-claims ran high in Parliament the same day over a question that was raised by Mutito MP Kiema Kilonzo.
Ironically, it was his accuser Assistant Minister Oburu Oginga who had sent one of the text messages inviting MPs allied to his party for “lunch” at Gazebo Grill restaurant as his boss Njeru Githae hosted other MPs at another deal-making “lunch” at the Panafric hotel.
A contestable assertion that the Constituency Development Fund (CDF) kitty was not being dropped but merely being baptized into a new name was another bait applied to sway the vote. The driving force was the illegal clause sneaked in to give an erroneous impression that MP’s will each earn a minimum gratuity of Sh3.7M.
When they went back to Parliament the pro-government side won by 58 votes against 17 votes. A whopping 149 MPs were not present at the time of voting. This meant that 67% of Kenyans were not represented in the crucial decision that affects all of them.
In the amendments, joint chief whip MP Jakoyo Midiwo had wanted Section 16A of the Banking Act amended to have the maximum interest rate that banks can charge on loans pegged at no more than four percent the rate set by the Central Bank Rate (CBR). The rate is determined by the CBK’s Monetary Policy Committee.
The MP had also sought to have the minimum interest banks applied on consumers’ deposits set to at least seventy percent of the base rate set by CBK. But that did not happen, not with the influential banks which successfully lobbied MPs albeit in an arguably unethical manner. It is not the first time Kenyan banks have use the same initiative. In 2001, former Gem MP Joe Donde’s attempt to move the very amendments, suffered a similar fate.
While the banks had succeeded through intrigues, sideshows and other shenanigans to get their wish, the truth is they may have won the day's battle but the war to rein in unrealistic and extortionist interest rates is still on.
This time round, the MPs also got the worst of the deal. Why? Unknown to MPs as they voted and majority skipped the vote to save their face, already forces are consulting to have the Judiciary find the salary deal as an illegality.
The banks will also not get away scot-free. The vulnerability and soft underbelly of these huge profitable businesses were exposed. Their frantic lobbying to drop the interest capping amendment confirmed fears long held by the public that the banks are over-draining consumers, especially on the disproportionate rates on loans and deposits, to maintain their unreasonably high profits.
The wheeler-dealing in and outside Parliament pointed to a burgeoning industry that is akin to an inflated balloon and one which will only take a single prick to deflate. That deflation will become effective as and when credible alternatives to banks come up.
The import of what former Safaricom CEO Michael Joseph said when he recently eulogized the late former Finance Minister John Michuki and credited him with saving the popular MPesa service was not lost to Kenyans. It was obvious who was threatened by the innovation that has seen more Kenyans access services previously only available in our banks.
Regrettably, the savings and credit cooperative societies (Saccos) which could have given banks a run for their money have literally stalled the hopes of their members when they became a haven of graft and inseparable from bank overdrafts and loans.
When businesses run out of ideas and innovations to keep their profits and customers, some resort to underhand activities which in the long run hurt them more than anything else.
Kenyan banks and the Treasury may have misled the MPs to vote in the manner they did. But by a single stroke of their action, the move that would have renewed the much-sought for competitiveness and transparency among banks, dampened the hopes of Kenyans accessing cheaper loans any time soon. Under the circumstances, one would hope that President Kibaki will not be quick to assent to the Bill without some crucial amendments.