This archive report was first published on 6 November 2019.
On Tuesday, the Central Bank of Kenya (CBK) Banking Sector Charter of 2018 was adopted by commercial lenders, opening up commercial lending to public scrutiny.
Kenya Bankers Association Chairman Joshua Oigara stated that banks have repriced themselves in the last three years, and the fear of unreasonable interest rates is unwarranted.
“The pricing by banks is not something you wake up and roll the dice on,” Oigara said.
According to Oigara, banks will price loans reasonably, and customers should not accept sudden increases in interest rates.
Kenya's largest bank by asset base, KCB, stated that customers with high risk profiles may only see a two to three percent hike in interest charges.
“Banks have reached a new business model. We lend to current customers at 13% because we have accepted their risk profile as an industry. That will not change the next day,” noted the bank in a statement.
However, the public distrust of commercial banks has only heightened in the post-rate cap environment as many fear a return to the previously exorbitant rates.
MPs opposed to the re-introduction of the free-enterprise regime in the credit market have vowed to stay fixated on the bank’s behavior in the post-rate cap while promising even tougher sanctions on the lenders in the eventuality of observed disobedience.
NCBA Managing Director John Gachora stated that new interest rates will be anchored on the prevailing market conditions, which until now compose of lower yields on government paper, and contained inflation.
“Banks will always price credit by market conditions. If the fundamentals hold, lending at one percent is possible but has to be sustainable,” he said.
