23 July 2012

Kenya: Bank Lending Rates Prohibitive - Study

Four out of 10 Kenyans in urban areas cannot consider getting credit from a commercial bank due to the current high lending rates, according a new study.

The study by Infotrak Research and Consulting Company shows that apart from the high lending rates, most Kenyans are irritated by - long queues in - banking halls, slowness in processing loans and poor customer care.

Presenting the study, Infotrak Managing Director Angela Ambitho said a majority of the respondents said they felt the banks don't consider the ability of Kenyans while increasing the lending rates.

Ninety-four percent said they would want interest rates to go below 10 percent from the current 20 percent and above.

Thirty-eight percent want the rates at between one to five percent, while 56 percent said they want rates of between six and 10 percent.

Ambitho said Kenyans feel that the Central Bank of Kenya (CBK) is not doing enough in regulating - banks as far as rates are concerned.

"If we want to jumpstart the economy, we need to have a population that is actually investing. And how else do you invest if you do not have capital? So the desire to invest is there, but access to credit is still a challenge," said Ambitho.

The Consumer Federation of Kenya COFEK which sponsored the study urged the CBK to hasten the process of coming up with measures which will require banks to disclose information to customers before they take any product.

COFEK Vice Chairman John Juma claims that banks have continued to exploit Kenyans by not only having many hidden charges but also not advising them accordingly when taking loans or other banking products hence they end up taking wrong products.

"Banks have a very unique way of defending themselves and on the other hand denying Kenyans important information. Banks need to inform their customers what their standings with the banks are," Juma said.

He complained that the banks are still slow in bringing down - lending rates, even after the CBK reduced its CBR to 16.5 percent, with less than 10 banks having announced the reduction of their rates.

"You don't lend to Juma at 26 percent, the money which you got at 1.2 percent. Then even without doing any other business, you will still announce the 'ungodly' profits," he complained. "And the problem is that a big chunk of these Kenyans have their deposits under what the banks call- cheap deposits."

COFEK has also called on the CBK to come up with measures that protect customers from any unexpected loss like when banks are involved in big financial scandals or go bankrupt.

Sixteen percent of the urban Kenyans are still unbanked, according to the study.

The study was done on July 19 and 20 July, where 1,000 people were interviewed- in nine towns across the country.

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