Postbank to start private sector lending next year

The Kenya Post Office Savings Bank is eyeing the lending market next year as it seeks to rev up profits and earn higher returns from deposits.

The century-old institution is only allowed to have savers and not borrowers, which has seen it channel the bulk of its deposits — which stand at Sh18.5 billion — to government securities.

“A lot of progress has been in terms of discussions and we expect that by next year, we will get the approval to start lending money,” said the bank’s managing director, Nyambura Koigi (right), in an interview on Thursday.

“The restructuring process takes a long time and involves Parliament, which has been busy discussing the Constitution’s implementation.”

In the absence of lending business, Postbank has been expanding not only on savings products but also its channels of delivering services.

It has services such as cash collection, payment of salaries and pension, safe custody and has links with money transfer services. Postbank was the pioneer agent of the Western Union Financial Services International in Kenya.

Post Bank has more than 16 savings products targeted at the entire breadth of the market including Smata Account targeted at savers below 18 years. The minimum opening balance for the account, which was launched on Thursday, is Sh50.

To circumvent the lending prohibition and increase its earnings, PostBank in August partnered with AAR Credit Services to offer short-term loans on their behalf.

But the bank is now seeking a piece of the private sector lending market that has emerged as the biggest driver of Kenya’s financier’s profits and income.

At present, the average base lending rate stands at 23.1 per cent, which is lower than the return of 12.3 per cent when one lends to the government through the 91-day Treasury bills.