Justus Ondari
15 October 2008
Nairobi — The cost of accessing finance in the country is still high despite the increased competition in the banking industry, a Central Bank of Kenya survey shows.
The CBK survey released on Wednesday shows that while none of the 43 banks surveyed reduced its charges and lending rates since December 2007, a number of them have revised them upwards over the same period.
On unsecured loans, which are given to individuals, K-Rep Bank is the most expensive for a borrower going for a Sh500,000 loan payable over a 3-year period.
Apart from increasing its interest rates from 16 per cent in December 2007 to the current 18 per cent, it also calculates its loans on a flat rate meaning a borrower will end up paying Sh270,000 as interest and Sh10,000 as other charges on top of the principal.
Imperial Bank and Barclays Bank of Kenya, which also revised their rates upwards during the year to 14 per cent and 16.90 per cent respectively and calculate their loans on a flat rate, trail K-Rep.
A client going for a Sh500,000 loan will repay a total of Sh759,988 at Imperial Bank and Sh753,512 at Barclays over the three years.
But in a move aimed at pre-emptying a situation where consumers could read too much into the survey, CBK and the bankers were quick to point out that it is not meant to name and shame the banks.
"I wish to state that the exercise is not meant to determine the best and worst banks," John Wanyela, the Kenya Bankers Association chief executive, who was the first to speak during the launch, said.
Rose Detho, the director in charge of banking supervision at CBK, concurred saying the survey is to provide information so that clients can make informed choices and decisions.
"We are not ranking the banks. But with the survey, you have enough information to enable you to negotiate with your bank terms that are favourable to you," Ms Detho said of the report, which is the third edition since the first one was released in March 30,2007.
Commissioned by CBK with the assistance of Financial Sector Deepening Kenya, the survey was conducted by Research International.
The report, which comes after the one released in April this year, uses returns submitted to CBK by commercial banks as at June 30,2008.
Although Victoria Commercial Bank is the cheapest for a client going for a Sh500,000 unsecured loan over three years at an annual interest rate of 13.50 per cent, will pay Sh500 in other fees and Sh109,063 over and above the Sh500,000 principal sum.
Cooperative Bank of Kenya and Consolidated Bank of Kenya, with an annual interest rate of 13.50 per cent and 14 per cent respectively, are the second and third cheapest for the same loan.
But it will cost their borrowers Sh10,250 and Sh10,000 respectively in other charges, and Sh114,313 and Sh117,917 respectively as interest over the principal sum.
Credit Bank Ltd, the cheapest, charges its current account holders the least at Sh392 per month with a Sh5,000 account opening balance. Equity Bank's personal current at Sh545 per month closely follows it.
Standard Chartered Bank's ordinary current account, although it has a lower opening balance at Sh2,000, is the most expensive as it costs the holder Sh2,747 per month.
For bundled accounts, which are current accounts where a bank charges a single discounted fee for a bundle of services, Kenya Commercial Bank's Amana account is the cheapest with a fixed Sh500 monthly fee.
Diamond Trust Bank of Kenya's Super Salary Account, Executive Account and Value Accounts are the second, third and fourth cheapest accounts with total monthly costs of Sh585, Sh890 and Sh921 respectively.
Stanchart's X Account with a total monthly account cost of Sh2,688 is the most expensive followed by CFC Stanbic Bank's Executive Banking with total costs of Sh2,293.
For transaction accounts, Prime Bank's Faida account, despite having a Sh10,000 minimum balance and a Sh65 monthly average cost, its Sh100 total monthly costs ranges it as the cheapest.
Bank of Africa's transaction account at a monthly Sh1,102 fee is the most expensive followed by Equatorial Commercial Bank's account which levies Sh1,000 per month.
Barclays Bank's Mega Saver, with its interest calculated at 6 per cent per month, is the most lucrative savings account where a Sh2,000 monthly saving could see the saver having Sh24,682 in the account at the end of one year.
Family Bank's Tujenge account is the least paying where Sh2,000 saved monthly will earn an annual 0.5 per cent interest to see the saver holding Sh24,054 in the account.
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