40-Year Low @ Bank interest rates

 40-year low @ Bank lending rates

Business Daily reports that Bank lending rates have hit a 40-year low, but there is no scramble for loans. Indeed, those that are obtaining loans have to provide securities and a guarantee before they are granted these affordable loans. However, looking back at the rate cap that was recently revoked, I wonder if this was the intended effect of rate capping – to make loans affordable. Ironically there are no takers. But what does this mean for an economy which still needs money to operate and yet is stuck “operating below potential”? While we tend to keep watch on the numbers as a guide to economic performance, banks have signaled that the data speaks of the COVID-19 pandemic effects being around for the next three years. With the government still big on spending with the BBI referendum and the General Elections scheduled within that time, that means tax collection is going to be squeezed out of every corner – no relief for Mwananchi. Loan rescheduling has bought time for the big players and the withdrawal of unsecured loans has dealt a big blow to cash flow, mortgage payment and wealth creation. It is no wonder that even with a 40-year low in cash flows, no one really wants to borrow. The focus for survival appears to be on cushioning unemployment. However, the real question might be how to get everyone, and I mean everyone, back into production? That is probably where the rubber meets the road.   

Allan Bukusi,

Reference - Business Daily