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Kenyan parliamentary committee has rejected a request from the finance ministry to scrap the cap on commercial interest rates imposed by lawmakers in 2016, a document seen by Reuters on Wednesday showed.

The Finance and National Planning Committee instead recommended that the law capping lending rates be rewritten more clearly.

The finance ministry had asked in June for the cap to be dropped, arguing that it had constricted private sector credit as banks shunned lending to customers deemed risky, including small and medium-sized businesses. The central bank has said the cap probably reduced 2017 economic growth by 0.4%.

Commercial interest rates were capped in 2016 at 4 percentage points above the benchmark central bank rate — currently 9% — by lawmakers who said they were concerned about high loan costs.

In March, the High Court ruled that the section of the law capping rates was unconstitutional and gave parliament a year to amend it.

According to the document seen by Reuters, the Finance and National Planning Committee asked that the law be rewritten to make clear that the cap applies to annual interest rates on all commercial loans.

Lawmakers debated changes to the law last week and will discuss it further at its second reading on Wednesday, although no vote has yet been scheduled.

If parliament votes in favour of the finance committee’s recommendations, it will be the second time lawmakers have rejected calls for the rate cap to be scrapped, after shooting down a similar move in 2018.

Source: Reuters.