EDITORIAL: Cost of loans portal is a welcome lift for borrowers

When it was announced that a cost of credit report to help Kenyan borrowers would be rolled out, some greeted the news with scepticism. 

But the data released by the Kenya Bankers Association and made available to the public on a new website is a step in the right direction.

We aver that the cost of loans portal is a great idea as it lifts secrecy surrounding loan rates and empowers the borrowers.

The portal has, for example, revealed that borrowers seeking  commercial bank loans stand a better chance of getting the best-priced deals from the small lenders.

The lending data ranking is based on the tabulation of what it would cost a borrower to repay a Sh1 million unsecured loan over a 12-month period.

It shows that it would cost a borrower the equivalent of 42 per cent of the total cost of credit at one institution because of the fees compared to zero fees at a smaller institution.

The data shows that the big financial institutions in terms of assets and customer base are offering borrowers the most expensive loans.

It reveals that the higher cost of credit arises from the numerous and larger non-interest charges, including appraisal and processing fess, on the loans.

And this is despite them incurring the lowest cost of funds when compared to their smaller rivals.

According to analysts, the smaller banks are offering the cheaper rates as they don’t have the market clout that allows their bigger rivals to charge higher fees.

Previously, borrowers were in a quandary as they were not in a position to know where the best rates lay due to the culture of secrecy that has been endemic in the sector.

Armed with the new data, the borrowers will now be in a better position to find a better deal that sits their pocket.

We welcome the efforts by lenders to enlighten the general public on what is in their credit portfolio.