November 6, 2019 / 8:19 AM / a month ago

UPDATE 1-Kenyan bank shares up after parliament passes rate cap repeal

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NAIROBI, Nov 6 (Reuters) - Kenyan bank shares gained in early trade on Wednesday after President Uhuru Kenyatta’s bid to remove a cap on commercial lending rates was passed in parliament on Tuesday, a move that could boost the flow of credit to the economy.

Equity Bank rose 4.93% to 50.0 shillings ($0.4854), while KCB Group jumped 5.97% to 53.25 shillings, Refinitiv data showed.

The Kenyan government and the country’s banks have said the rate cap, imposed in 2016 with the upper limit of commercial lending rates at 4 percentage points above the central bank rate, had stifled private sector lending growth and reduced the effectiveness of monetary policy.

The effect of the cap also extended to the wider economy as businesses that struggled to borrow were forced to lay off workers and the real-estate market has found it hard to sell homes in a credit-stalled environment.

The central bank revealed in a study last year that the cap had cut an estimated 0.4% from 2017’s economic growth and has said it has also made it difficult to convey its monetary policy signals.

$1 = 103.0000 Kenyan shillings Reporting by Omar Mohammed; editing by Elias Biryabarema and David Evans

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