By Duncan Miriri
NAIROBI, Aug 28 (Reuters) - Kenya's national assembly hasrejected a proposal by the finance ministry to increase theminimum core capital for banks to 5 billion shillings ($48.17million), saying it would stifle the sector's growth, the headof parliament's budget committee said.
In his budget speech in June, Finance Minister Henry Rotichproposed increasing the minimum core capital requirement forbanks progressively from 1 billion shillings to 5 billionshillings by December 2018.
"If you raise the core capital requirement you are reallysaying those without deep pockets have no chance of joining thebanking sector," budget committee head Mutava Musyimi toldReuters on Friday.
The decision by the committee on Thursday is final.
Analysts said the move could have forced mergers andacquisitions as smaller banks sought partners to survive.
Kenya has 43 commercial banks ranging in size from Barclays and Equity Bank in the top league andsmaller homegrown lenders like Jamii Bora Bank.
Rotich argued that consolidation would lead to stronger,better capitalised lenders to support more investment.
But the new central bank governor, Patrick Njoroge, rejectedthe proposal in comments to lawmakers this month, saying itwould lock out smaller lenders which offer niche services andproducts.
Njoroge also said there was no evidence that consolidationwould drive commercial lending rates lower, which he has said isone of his goals as governor.
Businesses often complain that high borrowing costs hurtinvestment. ($1 = 103.8000 Kenyan shillings) (Reporting by Duncan Miriri; Editing by Edmund Blair and KeithWeir)
Barclays (BARC)
