Banks’ profits are not always good for Kenya. Take the recent surge in earnings on their foreign currency exchange, and consider, for a moment, the implications of that ‘surcharge on all foreign trade for the rest of the Kenyan business community, and all Kenyans.
This new ‘take’ on currency is extreme.
On one payment that went through Absa earlier this month, the bank deducted more than Sh5,887 on an Sh78,750 transfer, when calculated as the difference between what arrived in Sterling and what would have arrived at that day’s mid-market rate.
That is a margin of nearly 7.5 per cent. Yet, normal margins on currency exchanged by banks worldwide run at around 0.5 per cent to 1.5 per cent, with occasional outliers in the two to four per cent range. No one else charges 7.5 per cent.
Nor has the government introduced an extra 7.5 per cent surcharge on every single incoming and outgoing item or service traded with Kenya: because to do so would be economically crippling, as a huge dead hand on the economy.
Every Kenyan loses from these charges.
Foreign suppliers of goods normally charge prices in their own currency, and it is thus the local Kenyan buyer who pays the extra 7.5 per cent directly to the bank to get their goods paid for dollar, sterling, or Euro price.
That means every Kenyan import, from maize, fertiliser, tractors and accounting services to paper supplies, clothing, shoes, computers, and cars goes up in price, in a jump.
Nor does it stop there. Because then there are our exports.
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Now, when a Kenyan business makes a sale to any foreign buyer, the money that comes back to them will, most often, be less our thirsty banks’ new charge: so, where that exporter, last year, would have got Sh105,000, at the very same price, and the same exchange rate, the bank will now deduct an extra Sh5,000 (or more) of that.
That’s a hit for every horticulturalists, every tourist hotel, and every exporting Kenyan business.
So now cheer about how the banks got their profits this year, from your children’s school shoes and your avocado sale, and see how good it feels.
For remember this, too: many of these banks are foreign-owned. Those profits are often not retained in Kenya.
Absa, of the 7.5 per cent charge, is South African. So now, we are funding South African banking profits from our avocado sale, and buying our school shoes.
And the best part: no rules. The Central Bank has no limits, and the government has no regulation, those banks can do anything they like to our import prices and export earnings.