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Bank charges loophole raises cost of loans to 19pc
KBA data shows major variations in charges by different banks, resulting in the effective lending rate rising up to 26.5 per cent based on what it would cost a customer to take a one-year Sh1 million personal unsecured loan. PHOTO | FOTOSEARCH
Commercial banks have taken advantage of a legal loophole allowing them to load extra charges on customers’ loans to drive the cost of credit way above the current statutory cap of 14 per cent.
The average cost of loans based on the banks’ own online portal that discloses lending charges currently stands at 19.1 per cent, with some borrowers shouldering effective repayment rate of up to 26.5 per cent on a reducing balance basis.
