Weekly Newsletter - Issue No 100
5 - 11 September, 2016


Guest Blog: Capping Banking Interest Rates in Kenya: The Twists and Turns

About two weeks ago, President Uhuru Kenyatta signed off on the Banking (Amendment) Act 2015 introduced to Parliament by Jude Njomo, the Member of Parliament for Kiambu.

It among other things requires banks and financial insitutions to disclose all bank charges relating to a loan to a borrower, sets the maximum loan charge at 4% above the base rate, and requires interest to be paid on deposits at least 70% of the base rate. The bill also barred people from entering into loan agreements that exceed these amounts and penalizes bank executives and bank insitutions that contravene these clauses.

The move to rein in interests is a journey that has taken almost fifteen years.  It is not yet over yet. While the umbrella Kenya Bankers Association has asked its   members to adhere, about a third of the banks in Kenya have announced that they will comply, and the Central Bank of Kenya that opposed the Njomo bill has directed that non-compliant banks will face penalties, it is not clear how strong the bill will be if it is challenged in a court.

Credit for capping bank charges goes back to then Gem-MP Joe Donde who brought a bill capping potential bank interest and loan charges to an amount not exceeding the loan. His bill amended Section 44 of the Banking act, introducing what was known as the “in-duplum rule” and it came after a period of high interest rates, when people who borrowed modest amounts e.g. Kshs 1 million, found themselves owning the banks colossal amounts, e.g. Kshs 10 million, even after years of paying their loans.

The Donde Bill was cited as one of the greatest threats to banking in Kenya since the Goldenberg years, and one CEO said that retroactive implementation of the in-duplum rule, would wipe out many local banks.

But its’ effect was seen. It made some borrowers question their bank charges and interest rate calculations.  A Donde-related outfit, the Interest Rates Advisory Centre Limited (IRAC) was formed in 2001 and took part in several cases on behalf of borrowers who chose to verify or challenge these amounts of interest of finance charges levied by banks. The IRAC site lists many of them, noting that some cases were dismissed, and in others they got judgment for their clients, and in others, others banks chose to settled out of court IRAC declared that in the several hundred cases IRAC has handled so far, the interest charged by BANKS on loans, overdrafts and mortgages is wrongly calculated in more than 90%.

A few years after Donde, Finance Minister David Mwiraria reinserted the in-duplum in the Banking (Amendment) Bill 2004. While MP’s pushed for that, asking for the rule to be backdated to the 1990; former President Kibaki wanted it to start in 2004 but he in the end declined to assent to it due to the in-duplum rule.

Later on the government gazzetted the Banking Amendment Act (2006) which proposed to among other things, a ban on bank charges within savings accounts and also had the in duplum rule but which would not be applied retroactively. Along with the Finance bill of that year, new banking amendments were partly effected including CBK got to vet the suitability of bank owners, CBK got a deputy governor, banks were allowed to share non-performing loan data with the Central bank, others banks and credit reference bureaus.

News of the Week

Opposition Leader Raila wants process of hiring new IEBC officials kicked off

ODM leader RailaOdinga has asked the President and his Deputy to speed up the process of hiring new electoral commissioners in order to have enough time to prepare for the 2017 General Elections. The former Prime Minister also wants recommendations on electoral reforms begun immediately. The President is yet to assent to the two Bills touching on IEBC raising fears that it might affect the election date.

Poor constituencies to lose out following amendment of CDF law

Poor constituencies will lose out following MPs amendment of the CDF law. The amendment now ensures all the 290 constituencies get the same amount. Legislators defended the changes saying allocation should be done fairly without favoring any constituency. Additionally, the lawmakers circumvented the court ruling denying constituencies Sh10 billion for CDF. Through the second amendment, the government is therefore allowed to fund stalled CDF projects falling within the purview of the national government.

Reprieve for gamblers as law on tax for winners dropped

Gamblers will no longer have to pay withholding tax after Members of Parliament changed law on income tax. The decision came after the National Treasury advised that it was impractical to act on the law because it demanded that the winner must have a Personal Identification Number (PIN) as well as meet the iTax requirements.

Speakers of the two Houses and AG sued over gender Bill

Two lobby groups sued the Attorney General, and the Speakers of the Senate and National Assembly over their failure to enact the two-thirds gender rule. The lobbies in their case argue that women have suffered political exclusion and have been denied their right to participate in public appointments in the previous years. They want the court to push for an enactment of the legislation before the next general election.

Meanwhile according to the Election Laws (Amendment) Bill, 2016 parties that have a higher number of special interest candidates; including women will have the largest share of the 15% of the Political Parties Fund.

Foreigners free to vie for Electoral Commissioners posts

Foreigners may be appointed to serve as commissioners to the Independent Electoral and Boundaries Commission (IEBC) after MPs passed the Elections Laws (Amendment) Bill, 2016 that removes the previous provision that commissioners must be Kenyans. The Bill is currently being reviewed at the Senate and will be presented to President Uhuru for Assent.

National Assembly on Recess

Members of Parliament are on a month long break that begun on Monday 5th September.


Quote of the Week

"Women account for approximately a half of this country’s population. They have a right to be represented. There are those who argue that women are not experienced. The experience of women is different from men. The elections of this country are tedious and laced with violence. I am sure from the 1st Parliament to this Parliament, the numbers are growing. Women are coming up for elective seats and, at the end of the day, we can achieve this."

Sentiments by Hon. Aden Duale while contributing to the Constitution of Kenya (Amendment) Bill on March 22, 2016

Read the Hansard

Lest we forget

"Today we are reflecting on the Elections Act. Do we want to keep quiet? Maybe we would have needed better qualified MCAs. So, when we lowered the bar in the last Parliament, we did not know what we were taking away from the democratic practice in our county governments. We know that we did not tighten the law sufficiently because a lot of people are today being challenged in court for having fake qualifications courtesy of a loose election law."

Sentiments by Hon. Bonny Khalwale when contributing to the Political Parties (Amendment) Bill on June 10, 2014.

Read the Hansard

Newsmaker this Week

The demise of former Narok North Member of Parliament Hon. William Ole Ntimama swept the headlines this week. The Late Ntimama was a former diehard KANU supporter in the pre-multiparty days, but would later leave KANU for Democratic Party (DP), and later Orange Democratic Movement (ODM) under which he served his last term as the MP for Narok North before retiring in 2013 having given 25years of his life serving the people of Narok North.

He was known as a strong defender of the Maa community and, his passion for the Maasai people sometimes put him at logger-heads with the authorities because of the controversial statements he would make in the heat of the moment. He is reported to have died of natural causes.


Bills before the Senate

First Reading


Sponsored by the Senate Majority Leader Sen. (Prof.) Kithure Kindiki

This Bill seeks to amend the Elections Act, 2011, the Independent Electoral and Boundaries Commission Act, 2011, the Political Parties Act, 2011, the Supreme Court Act, 2011 and the Registration of Persons Act. The Bill addresses the concerns noted by the Joint Parliamentary Committee on matters relating to the Independent Electoral and Boundaries Commission and the conduct of elections. The Bill covers electoral reforms agreed upon by the leading political coalitions in Kenya. 
Third Reading: Committee of the Whole House


- NO. 11 OF 2015
Sponsored by Sen. Mutula Kilonzo Jnr.

The aim of this bill is to ensure that outdoor advertisements respect amenity and do not prejudice public safety, including road safety and that the display of outdoor advertisements contributes positively to the appearance of a well-cared for and attractive environment in counties. The Bill proposes to establish a county outdoor advertising committee that would be responsible for the issuance of advertising licenses. The Bill also provides for the procedure for the application for advertising licenses.


Sponsored by the Senate Majority Leader Sen. (Prof.) Kithure Kindiki

This Bill merges the offences relating to elections into one Act. These offences include:- multiple registration as a voter, impersonation, bribery, undue influence, use of force or violence, prohibition of use of national security organ, use of public resources, participation of public officers, transfer of voters and prohibition of employees to go and vote.  

The aim is to strengthen the administration of elections and prosecution of electoral offences. It also aims to give clarity to some of the existing provisions in the Elections Act, which make it hard to prosecute. The Bill sets a time limit within which the Director of Public Prosecutions may commence proceedings in relation to an election offence.

On the other hand, the Bill prohibits the use of public resources by candidates during elections and empowers the Independent Boundaries and Electoral Commission to demand a full account of all public resources ordinarily at the disposal of the candidates, where a candidate is a public officer.

The Bill also provides for offences related to the use of Information and Communication Technology in elections.


- NO. 01 OF 2015
Sponsored by Sen. Martha Wangari


- NO. 46 OF 2015
Sponsored by the Senate Majority Leader Sen. (Prof.) Kithure Kindiki


- NO. 06 OF 2015
Sponsored by Sen. Joy Gwendo

Public Participation

Invitation to members of public; particularly social media users to participate on a tweet chat on democracy in Kenya, tomorrow Thursday 15th September from 3-4pm

International Day of Democracy falls on 15th September. This year @mzalendowatch invites you to participate by tweeting your thoughts on the subject regarding our country Kenya. Why do we get it wrong and how can we correct this? You are kindly advised to use the hashtag #DemokrasiaKE when tweeting.

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