Banks have left borrowers in the dark by neglecting disclosures on loan pricing under the cost of credit website.
Delays in updating data on the website have forced potential borrowers to reach out directly to different lenders on loan pricing in a time-consuming exercise, contrary to expectations.
The website was launched in June 2017 as a collaboration between banks, represented by the Kenya Bankers Association (KBA) and the Central Bank of Kenya (CBK).
It provides information on interest rates and charges relating to loan products offered by commercial banks and microfinance banks including personal secured loans, unsecured loans and mortgage loans.
KBA, the bankers' lobby, has admitted to challenges in keeping the cost of the website update even as it mulls the modernisation of the platform.
“The website is working but we have to ensure that we are continuously improving it. We want to put in a mechanism of ensuring that the website is up to date and that at any point in time periodically, say monthly, banks can commit that the numbers are still current,” KBA CEO Habil Olaka told the Business Daily.
The cost of credit website was floated as part of the solution to high-interest rates that paved the way for the introduction of interest rate caps in September 2016.
At present, each individual bank is expected to update information on the website but there exists no mechanism to establish when a bank has not updated.
The website provides for two key outputs that allow customers to compare loan facilities across banks — the total cost of credit and the annual percentage rate.
The information provided on the website is expected to complement the information provided by banks on fees and charges on loan facilities.
The CBK, nevertheless, says customers are expected to perform their own due diligence and contact their banks for details prior to signing any loan agreement.
The website features a cost of credit calculator for estimating the total cost of a bank loan.
Banks are also required by the CBK to provide a total cost of credit breakdown and a repayment schedule.
The entry of risk-based credit pricing has nevertheless made the disclosures difficult as parameters and pricing models now differ from bank to bank.
As a result, Dr Olaka says the modernisation of the website will see current costs and fees displayed as a range to further factor in the differentiation of risks from one borrower to another. “With risk-based pricing, we would rather have a range than have a point interest rate," he said.