This archive report was first published on 12 August 2019.
On August 12, 2019, Kenyan banks paid the lowest interest rates on customer savings in 32 months, with an average rate of 4.71 percent.
This marked a significant decline from the average rate of 6.52 percent in August 2018, when Parliament voted to tweak the Banking (Amendment) Act, 2016, and removed a clause compelling banks to pay depositors at least 70 percent of the base lending rate.
With the Central Bank of Kenya's (CBK) base lending rate currently at nine percent, banks would have paid at least 6.3 percent, resulting in customers losing 1.6 percentage points on their savings accounts since the law was changed.
According to CBK data, at the close of May 2019, banks were holding Sh3.4 trillion in deposits, a Sh160.6 billion increase from the Sh3.24 trillion at the time the clause on interest rate was removed.
During this period, banks kept their lending rates relatively stable, with a marginal decrease from 12.78 percent in August 2018 to 12.47 percent in May 2019.
As a result, banks are now enjoying more than 2.6 times the gain on interest-earning savings from customers.
Pre-tax profits for banks hit Sh70 billion in the five months to May 2019, a 12 percent increase from Sh62.5 billion in the same period last year.
