Interest rates on loans should be capped at 4 percentage points more than the prevailing CBR, according to Members of parliament led by Gem MP Jakoyo Midiwo. Amendments to the Finance Bill 2011/2012 sponsored by Midiwo to have the lending rates capped was defeated in Parliament in March this year. Midiwo has since said MPs shot down the amendments for reasons he thinks more selfish than nationalistic.

"This market must be controlled. In the coming month, I will be introducing similar amendments to the Finance Bill 2012/2013," said Midiwo said earlier this month.

Central Bank of Kenya's Monetary Policy Committee reduced the Central Bank's base lending rate to 16.5% down from 18%  on July 5. The MPC attributed the lowering to improvements in inflation and the local currency exchange rate. The rate of inflation has declined to 8.86% to 10.05% down from 18.91% in October 2011, while the local unit is trading at an average of KES 84 to the dollar.

The proposals to have interest rates controlled has been a contentious issue for more than a decade and since the introduction of Finance Bill 2011/2012, parliament had rejected the bill forcing the Finance minister to withdraw it twice.

The failed amendments had proposed to cap interest rates on loans at at most 4 per-centage  points more than the then 18% Central Bank Rate, which would have put the cap at 22% and put a base on deposit interests at 12.6%.

With the governments projections that inflation rates would go below 9% by the end of the year, Midiwo says the MPC should further lower the base rate to allow commercial banks to give borrowers affordable rates.