American business magnate, Sam Walton, who founded Walmart, famously said: “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”
Outgoing Central Bank of Kenya (CBK) governor Patrick Njoroge has constantly been reminding customers to unleash this power against any financial institution that does not put customers at the heart of what they do.
He has earned his place as a governor who took on the high and mighty to see that customers seeking financial services exercise their power.
While Dr Njoroge was against the capping of loan interest rates, he used the moment to remind banks to avoid “bad manners” of charging customers punitive interest rates.
He believed all customers deserved to be given upfront full information of any loan product they were taking so as to vote with their feet whenever they felt dissatisfied.
“There is the element of voting with your feet. Your bank is providing you with particular services or fees or whatever else it is, they are giving you a lot of kizungu mingi, the customer should really move to another bank and say, okay, this is what my bank is telling me, what do you have to offer?” he advised customers at the onset of rate caps.
Even as he joined banks in convincing the government that the caps were bad and had brought about the unintended consequence of cutting the flow of loans to the private sector, he worked behind the scenes to save customers from pre-rate cap rates of as high as 25 percent.
He worked with banks to set up the cost of credit websites, where lenders now have to disclose their interest rates, fees and other third-party charges to allow customers to make comparisons.
By the time rates caps were removed in November 2019, all banks had signed to what he called the banking sector charter, requiring them to entrench “responsible and disciplined” practices that are alert to “unique socio-economic realities of the Kenyan populace”.
Dr Njoroge, among other things, required banks to commit to resolving customer complaints within seven working days of receiving them.
And instead of returning the market back to the “bad manners” he has used the banking sector charter and the risk-based pricing models to ensure banks justify the rates they want to charge customers in the post-rate cap era.
He was also quick to take notice of many complaints about digital loans apps, which for long operated without any supervision and were charging customers as high as 600 percent annual interest rates.
Dr Njoroge last year brought all digital lenders under CBK supervision, barring them from blacklisting any customer who defaults on a loan of below Sh1,000.
The regulations also require digital lenders to make full disclosure of the charges for any loan and avoid debt-shaming or varying interest rates arbitrarily.
He exits office having urged for caution on the calls to roll out Central Bank Digital Currency (CBDC), saying that it should never be a “race to be first” but about identifying what really is in there to benefit a consumer.
“The focus of the assessment of CBDC innovation must be on functionality and the problem it resolves for the people rather than the technology,” said the CBK.
