CBK Governor on the spot as MPs probe expensive loans, NSSF deals

The Central Bank of Kenya (CBK) Governor Kamau Thugge is set to appear before the National Assembly’s Finance and National Planning Committee today to explain why borrowers are still struggling with high-interest loans despite CBK lowering its benchmark rate.

The committee, led by Molo MP Kimani Kuria, is seeking answers on alleged irregular bond transactions involving the National Social Security Fund (NSSF).

Despite CBK’s efforts to make credit more affordable, commercial banks have continued charging high interest rates.

The MPs are seeking clarity on what steps the regulator has taken to ensure banks pass the benefits of lower rates to borrowers.

“The committee will be seeking to know the interventions made by the CBK to ensure that credit from the local commercial banks is cheaper having lowered the CBR rate,” Kuria said.

The CBK’s Monetary Policy Committee (MPC) recently lowered the Central Bank Rate (CBR) to 10.75 percent from 11.25 percent, following a previous reduction in December 2024.

The move was intended to boost private sector lending and stimulate economic growth. However, there are concerns that banks have not adjusted their rates accordingly.

At the same time, the committee will question Thugge and Capital Markets Authority (CMA) CEO Wycliffe Shamiah over reports that NSSF engaged in questionable bond transactions.

Investigations revealed that NSSF bought bonds at inflated prices and later sold them at lower rates, raising suspicion of potential financial mismanagement.

A CBK report flagged irregular bond deals linked to NSSF’s Central Securities Depository (CSD) accounts, as well as those of an individual and a local investment bank.

In a letter dated August 19, 2024, CBK’s Director of Financial Markets, David Luusa, raised concerns about transactions between NSSF, Humphrey Wachira, and Pergamon Investment Bank Limited.

“The Central Bank of Kenya would like to bring to your attention some irregular trades carried out between May to July 2024 between NSSF Kenya, Humphrey Wachira, and Pergamon Investment Bank Limited,” reads the letter.

CBK’s analysis indicated that NSSF repeatedly purchased bonds at inflated prices and later resold them at losses, only to repurchase them at higher prices days later.

Shamiah was expected to follow up on the matter with CBK’s deputy director of debt management, but it remains unclear what action has been taken so far.

The committee’s probe follows an earlier request from CBK and CMA officials for more time to prepare their responses.

With CBK overseeing financial markets and regulating the banking sector, MPs are demanding accountability to ensure transparency in financial transactions and fair lending practices.