The National Treasury and Economic Planning Cabinet Secretary, John Mbadi, has urged banks to lower interest rates as a key strategy to reduce loan defaults among Kenyans. Speaking at a press briefing at the Treasury Buildings on Thursday, Mbadi emphasized that high-interest rates are a major factor contributing to the rising number of loan defaulters in the country.
“There are two ways of reducing loan defaulters. Number one is reasonable interest rates charged by banks. When banks start lowering interest rates, you reduce the rate of defaulters,” Mbadi stated.
The CS also highlighted the government’s role in stabilizing loan repayments by ensuring timely payments for goods and services procured by state institutions.
“The government, which is a single consumer for goods and services supplied by businesses, must ensure timely payments to suppliers,” he added.
Delays in government payments often create financial strain on businesses, forcing them to take loans they may struggle to repay. By addressing this issue, Mbadi believes the government can help ease financial pressure on businesses and individuals alike.
Kenya has witnessed a surge in loan defaults in recent years, largely due to high lending rates, economic challenges, and rising living costs. Many Kenyans, especially small business owners, rely on credit to sustain their enterprises, but the burden of repayment becomes overwhelming due to high interest rates.
Financial experts have echoed Mbadi’s sentiments, noting that reducing lending rates would not only ease the repayment burden but also encourage responsible borrowing and boost economic growth.
As the government pushes for economic reforms, stakeholders in the banking sector will be closely watching for potential policy changes that could lead to lower interest rates and improved financial stability for Kenyan borrowers.
