The monk vs. the master: Kenya’s banking stand-off
But the new law, which has been described as a political ploy with Kenya’s next presidential election in view, did not make everyone smile. The country’s central bank governor, Patrick Njoroge, had publicly urged Kenyatta not to sign the bill, writing in an op-ed that the lending rate cap “has put the National Assembly on a collision course with banks, which will inevitably result in even more suffering by the majority of the population.”
The problem with the bill, Njoroge says, is that it will encourage banks not to lend to small businesses and those deemed high-risk. “Capping interest rates will have overwhelmingly negative consequences on businesses and consumers,” he wrote in an op-ed that was published in The East African, a local newspaper. “[It] will lead to the emergence of credit rationing and the unavailability of credit to a wide segment of the population – particularly SMEs, new and small borrowers – with immediate adverse consequences on job creation and poverty,” he says.
At an investment summit in London, Njoroge was optimistic that his concerns would be heard by Kenyan politicians. “We haven’t begun seeing anything yet; [the interest rate cap] only came into place on 14 September,” he told The Africa Report. “We are cognisant of all the risks. We flag things so we can deal with them.”
Njoroge, who took up his post in June last year, is a career economist. After graduating from Yale University in 1993 with a PhD in economics, he worked as an economist for the IMF for more than 20 years. He is known as ‘the monk’ because of his devotion to the Opus Dei Catholic institution, which requires a modest lifestyle.
This is at odds with the lavish furnishings that Kenya’s government is known to enjoy. When Njoroge joined the government last June, he was reportedly offered a fleet of cars and a mansion in Nairobi, but rejected them because of his faith. “Why do I need to have a fleet of cars at my disposal?” he told the Wall Street Journal in December. “I’m only going to drive one. What’s the big deal?”
It didn’t take long for Njoroge to face his first crisis. Since he took office, three Kenyan banks have gone into receivership over liquidity problems. Despite a host of problems and challenges, Njoroge sees strong economic growth on the horizon. “The story used to be of Africa rising,” he says. “Now it is East Africa rising.”