Cut-price logic

THE Kenyan government has a problem. Its banks will not lend cheaply to the private sector. Tired of asking nicely, the government has taken matters into its own hands. This month it will put a cap on commercial banks’ interest rates: charging borrowers more than four percentage points above the central bank’s base rate, which now stands at 10.5%, will be illegal (see ). Shares of the largest Kenyan banks plummeted by 10% in response to news of the cap.This sort of crude meddling in the market may seem antiquated, but it is remarkably common. A review by the World Bank in 2014 found then that at least 76 countries impose a limit on interest rates. Half the countries in sub-Saharan Africa have such caps. Rich countries are also fond of them. In America, 35 states have ceilings on payday-loan rates. Lending at a rate of more than 17% in Arkansas, for example, is forbidden; any higher, and the borrower can claim back double the illegal interest paid.