Kenya RE managing Director Jadiah Mwarania. [Photo/bisinessdailyafrica.co.ke]Publicly traded companies reduced their money held by banks by sh 9 billion in the last 15 months indicating a reaction to the interest rate cap law introduced in 2016.
Kenya Re, a Nairobi Securities Exchange (NSE) listed company managing Director Jadiah Mwarania in an interview with the Business Daily on Tuesday said that most forms have instead turned to government securities where they invested additional sh 19 billion for the period under review.
“Capping of interest rates has lowered returns on bank deposits. So there has been a shift to higher yielding government bonds and T-bills,” Mwarania said.
Initially cash-rich companies had preferred bank deposits to government securities since banks paid a higher interest than government bonds and were more liquid with very short maturity periods of between a couple of days and a year.
In its latest report, Kenya RE said that they had invested most of its cash in government securities to guard against the interest rate cap law that is affecting bank returns.
“We reallocated funds into government securities to guard against the interest rate capping,” Kenya Re’s report reads in part.
Kenya Re raised its treasury stock by sh. 2.5billion to sh. 11.7billion while reducing its bank deposits by sh.1.7billion to sh.4.1 billion during the same period.