Commercial Lending interest RatesInterest on commercial loans
Furthermore, we need to determine the actual and past fiscal performances of your company. It is also necessary for us to know what your company has and what it has to ensure that your company is not excessively indebted and that you can administer the refunds.
For further explanations, read our section on our basic principles of corporate financing. If the loan amount exceed £25,000 we will ask you for all the above information as well as the following: Certain credit option arrangements may involve the use of some type of collateral such as real estate, a director's warranty or other asset to ensure financing.
What impact has the interest rate cap had on business in Kenya? |
2017 was a demanding year for the Kenyan economies, which, according to the Kenya National Bureau of Statistics, recorded 4.9% GNP annual inflation, the slowest since 2013. The 5.9% decline in 2016 GNP output is due to a number of reasons, among them lengthy electoral processes, serious drought and a worsening of loan expansion in the consumer debt area.
This is the result of a September 2016 move to limit commercial interest rates to four points above the Kenyan central bank's reference interest rates; the pace of implementing privatesector lending decelerated to 2.1% in February 2018, the slowest since 2005. The Kenyan CEO survey, in which 89% of those surveyed say that the upper interest limit has made accessing loans more or less impossible.
Where small and medium-sized businesses (SMEs) make up the largest part of the household economy, output still depends heavily on the wealth of this group. Following the advent of the interest caps, financial institutions were forced to introduce stricter instruments of riskmanagement and to focus on more secure investments.
As a result, smaller borrower such as small and medium-sized enterprises were becoming more and more avoided by such banks. In view of the slowdown in headline growth and in an effort to boost the economy, the key interest rates of the Federal Reserve were lowered from 10% to 9. 5 percent in March 2018, its low since May 2015. It has not yet been established whether this cut will revive loan expansion or not.
Additional changes to the Interest Limitation Act are currently being examined and will be revised after June 2018. The World Bank has indicated that the improvement of loan dynamics in the consumer finance system would necessitate not only the complete abolition of the interest barrier, but also reform that favours better and more accessible financing, such as the introduction of creditscoring and the improvement of fiscal aptitude.
Following the success of the introduction of the M-Pesa portable cash services, Kenya has been looking for technology to improve SME lending opportunities. Conza Cities - a $5 billion smartcity built 60 kilometers southeast of Nairobi - will make a significant contribution to mid- to long-term economical expansion.
Although concern about loan appreciation for the retail economy is expected to persist throughout 2018, a pick-up in the tourist industry and ample precipitation in the second half of 2017 suggest good overall outlook for the economy. Regarding GNP output 73% of those surveyed expect to see between 4% and 6% increase over the next 12 month.
The IMF, by way of contrast, expects to see 5 percent increase in sales. Creating a favourable climate for the country's own economy and for those small and medium-sized enterprises that can expand in the coming years and implement their own investments and business models will be critical to the successful Big Four of President Uhuru Kenyatta. Presented at the end of 2017, the Global Plan of Action is a concept for societal and economical empowerment based on four cornerstones - production, affordability, health services and nutrition for the next five years.