The Central Bank of Kenya governor Dr. Patrick Njoroge today raised concerns over the impact of the interest rate cap on the economy.

Speaking to the press earlier today, Njoroge mentioned that lending has reduced across the board, with the micro-small-medium enterprises (MSMES) bearing the brunt.

“Moreover, commercial banks’ lending to Micro, small and Medium enterprises fell by an estimated 5.7 per cent between August 2016 and April 2017, but with small banks recording an increase on average,” he said.

Central Bank of Kenya governor Dr. Patrick Njoroge

Conversely, according to the governor, the number of loan applications increased but the value reduced.

“The number of loan applications increased by 23.4 per cent between August 2016 and April 2017, but the value of loan applications decreased by 18.3 per cent, suggesting smaller size of loan applications,” he said, adding that the loan approvals also increased by 35.7 per cent with a reduction of 16.3 per cent on value.

The data was obtained from a number of stakeholders including credit officers and MSMES. Njoroge, however, said that they only used information provided from applications, thus borrowers who did not qualify to get to the application stage were not included.

“We had to study the data and avoid knee-jerk reactions,” Njoroge said, “We as the CBK continue to monitor the interest rate cap and how the banks are implementing it.”