Central Bank of Kenya reveals most costly, cheapest lenders

Central Bank of Kenya (CBK) has disclosed the credit pricing of banks indicating Transnational Bank and Centum-owned K-Rep are among the most expensive lenders on various loan products.

Data from the regulator shows Bank of India as, on average, the cheapest lender followed by the listed NIC Bank.

“Publication of information on interest rates for the banking sector is expected to increase transparency, competition, enhance credit access and lower the overall cost of credit to borrowers,” said Central Bank of Kenya.

Households are paying an average of 17.8 per cent for consumer loans and 15.2 per cent for mortgages.

Corporates enjoy the cheapest loans with some banks such as NIC, Chase and Bank of India charging less than the standard-base rate set by the CBK, referred to as Kenya Bankers Reference Rate (KBRR).

The KBRR is currently set at 8.54 per cent with banks allowed to load a premium on the base to cater for their operating expenses and cost of cash.

Small- and medium-sized enterprises are, however, paying much higher at 18 per cent while businesses that have secured loans with property are being charged 18.8 per cent for loans five years and above.

READ: SMEs rely on overdrafts as banks fail to offer options

Among the large banks Equity Bank is the cheapest for personal loans at 16.5 per cent compared to Barclays which was the most expensive with 19.9 per cent.

However, in mortgages Barclays was the cheapest while Equity was the most expensive among the top five lenders. Standard Chartered was the most attractive to SMEs and corporate borrowers.

The launch of the standard-base rate was meant to introduce transparency in pricing of loans by banks with Central Bank requiring them to disclose the premium loaded on each loan.

This was supposed to initiate competition in the industry which is expected to lead to lower interest rates.

The data, however, disclosed wide pricing margins by banks for similar products raising questions over the logic used by lenders to load the premium.

For example, Family Bank loads a premium of 26.2 per cent for micro loans while Equity charges 5.5 per cent above KBRR.

Transnational Bank charges personal borrowers 26.3 per cent while Paramount Bank has priced its consumer loans at 9.5 per cent despite both being ranked as small lenders.

“Every bank can argue for its pricing because it is based on its client base,” said Eric Munywoki an analyst with Old Mutual.

Analysts, however, point out that it was difficult for borrowers to exploit pricing differences within the industry as most lenders require them to have a banking history with them, typically of six months, before getting credit.

This requirement has limited borrowers to their current bankers even when they are not getting the best rate.

Transfer of collateral from one lender to another is also a long and costly process, making it difficult for borrowers to move existing credit from one bank to another.

CBK claimed that Diamond Trust Bank was the only lender not to have moved to the new pricing model.

Based on the KBRR of 8.54 and the average risk premium or K various banks report offering on loan products, find below the ten cheapest and most expensive banks for asset finance loans, bank overdrafts and consumer loans.

ASSET FINANCE LOANS

NOTE: These are interest rates charged as at March 31, 2015, based on information provided to the Central Bank of Kenya. Bank of India, Citibank NA, Diamond Trust Bank, Dubai Bank, Gulf African Bank, Habib Bank AG Zurich, Habib Bank Ltd, I&M Bank, Paramount Universal Bank, Prime Bank and UBA Kenya Bank did not provide any information about asset finance loans.

BUSINESS OVERDRAFT FACILITY

NOTE: These are interest rates charged as at March 31, 2015, based on information provided to the Central Bank of Kenya. CfC Stanbic (K), Bank of Africa, Barclays Bank, Citibank NA, Diamond Trust Bank, First Community Bank, Gulf African Bank, Habib Bank AG Zurich, Imperial Bank, National Bank of Kenya and UBA Kenya Bank did not provide any information about overdraft facilities.

CONSUMER LOANS OF 1-2 YEARS TENURE

NOTE: These are interest rates charged as at March 31, 2015, based on information provided to the Central Bank of Kenya. Bank of Baroda, Citibank N.A., Co-operative Bank of Kenya, Diamond Trust Bank, Guaranty Trust Bank, Gulf African Bank, Housing Finance, Oriental Commercial Bank, Standard Chartered Bank and Victoria Commercial Bank did not provide information on 1-2 year consumer loans.

CONSUMER LOANS OF 2 YEARS TENURE OR MORE

NOTE: These are interest rates charged as at March 31, 2015, based on information provided to the Central Bank of Kenya. Bank of Baroda, Citibank NA, Co-operative Bank of Kenya, Consolidated Bank, Diamond Trust Bank, Guaranty Trust Bank, Housing Finance, Bank of India, UBA Kenya Bank, Habib Bank Ltd, Habib Bank AG Zurich, Development Bank, Middle East Bank Kenya, Paramount Universal Bank, Oriental Commercial Bank and Victoria Commercial Bank did not provide information on consumer loans of above two years.