CBK dismisses Ruto’s banking promises, says it won’t act on 'political expediencies'

Central Bank of Kenya Governor Patrick Njoroge

Central Bank of Kenya Governor Patrick Njoroge. 

Photo credit: File | Nation Media Group

President William Ruto’s promises to sections of his support base touching on financial services may suffer rejection, with the Central Bank of Kenya (CBK) refusing to be drawn into taking actions aimed at satisfying political interests.

CBK Governor Patrick Njoroge has said the regulator will continue to be guided by data and its existing policies, as opposed to “political expediencies”.

During his inauguration, President Ruto made rosy promises to Kenyans touching on operation of financial services in Kenya, including promising to review the law to increase the limit of heavy cash transactions handled by banks without a requirement for reporting from the current Sh1 million and relaxing the Credit Reference Bureau Framework (CRB) to allow more Kenyans access credit.

“We shall take measures to drive down the cost of credit. Our starting point is to shift the CRB framework from its current practice of arbitrary, punitive and all or nothing blacklisting of borrowers, which denies borrowers credit. We will work with CRBs a new system of credit score rating that provides borrowers with an opportunity to manage on their creditworthiness. This will eliminate blacklisting,” Dr Ruto committed after being sworn in.

In the speech, meant to assure his supporters that he would fulfil issues they addressed with him, Dr Ruto also talked of how traders complained about the burden involved in cash transactions exceeding Sh1 million.

“I have been assured by the Central Bank that work on how to ease this burden without compromising the security of the financial system is underway,” he said.

During an interview with Bloomberg on Wednesday, however, the CBK governor said the regulator’s operations cannot be changed by a political administration and that the regulator would continue implementing its policies.

Monetary Policy Committee

He was responding to questions on actions the Monetary Policy Committee (MPC) is expected to take when it meets next week, considering Kenya now has a new administration.

“The Central Bank will continue with policies it has always had regardless of the new administration that has come in. Good central bankers do their work based on data as opposed to political expediencies. You will see the Central Bank continuing along the same lines as before,” Dr Njoroge said.

He said even to determine interest rates to be charged on loans and whether to increase them so as to lower inflation, the MPC will keenly rely on data.

“We as MPC members will look at the data before us, both domestic and external data, look at the various things including projections on inflation and it’s the data that will tell us what to do,” he said.

The governor said that while he noted that the CBK continues to take a keen interest on the direction both global and domestic inflation is taking, to inform monetary policy, price stability and not the shilling will guide the policy, he said.

Having failed to implement former President Uhuru Kenyatta’s directive to raise the heavy cash transactions limit from Sh1 million to Sh5 million, it’s not clear whether the CBK will have any change of heart on President Ruto’s call.

Mr Kenyatta last October issued the directive, stating that the requirement had driven many away from the formal financial services sector as they remained unease with the reporting requirement, where a customer is required to state source or usage of funds when depositing, withdrawing or transferring cash beyond Sh1 million.

The requirement is applied internationally to help countries share information necessary to detect illicit financial flows and the CBK did not issue guidelines on way forward to local banks, rendering Mr Kenyatta’s directive ineffective.