Market News

Banks say higher efficiency to help ease pricing of loans

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A banking hall in Nairobi. file photo | nmg

Commercial banks say more transparency in pricing of loans and improved efficiency will help weaken the case for the one-year old rate controls.

The Kenya Bankers Association (KBA) said a portal which displays the total cost of credit for commercial banks has enhanced transparency, enabling borrowers to compare loan charges by various banks.

The industry lobby said the cost of credit website it launched on June 22 in partnership with the regulator, Central Bank of Kenya, has had close to 25,000 visitors.

“All users are invited to give a feedback and so far 100 per cent of the feedback we have received is positive. We therefore are confident that this website is best practice in promoting transparency in lending,” KBA director of communications and public affairs Nuru Mugambi said.

Standard Chartered Bank chief executive Lamin Manjang who chairs KBA has said efficiencies as a result of enhanced use of digital banking channels, right-sizing of staff and investment in non-interest revenue streams since last year will help in fair pricing of loans.

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“There have been some efficiency that have been built in that space and this will enable us to offer loans at lower rates,” Mr Manjang said in an interview last week.

Interest rates on loans averaged 18.2 per cent before the Banking (Amendment) Act 2016 was enforced in September last year, capping loan charges at four percentage points above the Central Bank Rate, which has been steady at 10 per cent since last November.

Riskier borrowers, however, used to be charged as much as 25 per cent interest on loans. President Uhuru Kenyatta said he shared their frustration when he assented to the rate cap law on August 24, 2016.

“The banking industry is keen not to return to the days when we had runaway interest rates,” Barclays Bank of Kenya chief executive Jeremy Awori said last month.

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