An argument that the banking industry is slowly collapsing as a result of the capping is not true.
There are several factors that have contributed to slow economic growth.
These include political forces, corruption, insecurity issues, governance issues, and some of the draconian laws passed by the 11th Parliament.
We have learnt through the media about the intention by Central Bank of Kenya through the office of the governor to repeal the capping of interest rates law. An argument that the banking industry is slowly collapsing as a result of the capping is not true.
There are several factors that have contributed to slow economic growth. These include political forces, corruption, insecurity issues, governance issues, and some of the draconian laws passed by the 11th Parliament.
For a long time, commercial banks had been charging consumers extremely high interest rates on loans until the capping was introduced. There are a number of issues that need to be resolved before we think of reversing the law.
We have learnt that some commercial banks have changed ordinary accounts into business accounts, attracting huge maintenance costs without customers’ knowledge.
Some banks have gone a notch higher to revise their loan terms with intention to maximize the profits without prior consultation with consumers.
How many banks in Kenya conduct consumer sensitization on products and services they offer? And by extension seeking to consult with customers when they develop their credit terms, business models/guidelines and/or financial operation frameworks?
Ignoring consumers inputs in such processes is a clear indication that commercial banks are after making profits and no longer interested to design their products and services in accordance to consumer taste and preferences.
Our attention has been drawn to remarks by CBK governor Patrick Njoroge that the bank and the Treasury were tasked by the President on March 15 to study the impact the capping has had on access to affordable credit by small and medium sized-enterprises, and that from their findings, the capping is problematic and should be repealed.
We are wondering where CBK and the Treasury did their study when key stakeholders such as consumer organisations who represent interests of ordinary and voiceless common man are not contacted.
In fact, we can predict what the outcome would be even before the report is released. The CBK as the regulator may listen to one side of the issue by only choosing to consult with commercial banks and assuming their views would be final and binding even on the side of consumers.
We are not perturbed neither are we agitated by the report CBK is about to release, the outcome is already predetermined and all cards on the table.
As Consumer Downtown Association representing the voice of ordinary consumers in Kenya, we are of the view that the capping should not be repealed and that commercial banks should first put their houses in order and commit to uphold the rule of law, avoid customer exploitation and strictly abide by CBK guidelines.
Above all, involve all stakeholders when coming up with policy issues and studies that seek to address challenges in the sector.
We also applaud CBK and commercial banks for launching the Banking Calculator model, a platform where consumers can study interest rates charged by banks, calculate total cost of credit including summation and breakdown of monthly repayment.
The site named total cost of credit calculator is one of the wonderful strategies consumers desire to see. It is in conformity with Section 36 of Consumer Protection Act, 2012 on full disclosure. Let us all be involved to make the sector vibrant and futuristically sustainable.
Japheth Ogutu, executive director, Consumer Downtown Association
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
