The Central Bank of Kenya (CBK) has told banks to abolish unnecessary charges they impose on customers that contribute to the high cost of credit.
“Banks need to review their charges and abolishing nuisance fees which do not bring any significant income to the lenders but make a big difference to customers,” said CBK Governor Dr Patrick Njoroge.
Speaking yesterday, the governor said underlying concerns that lead to the high-interest rate in Kenya have not been resolved yet. Some of the charges that banks levy on their customers include legal fees, insurance, government levies, stamp duties, valuation fees, security registration and third party costs. Njoroge said banks need to focus more on customer relations and complaints.
He said since the interest rate cap law became operational, 16 banks had applied for review of their fees and charges but CBK has only approved three requests – where new products had been introduced.
“We have received 16 requests for imposition of fees or adjustments but have only approved three requests, while the rest have been held in abeyance,” said Njoroge. The governor said CBK was working round the clock to ensure that consumers access credit information. He said consumers would be better armed once they get the information.
“There are some areas we want to improve so as to empower the consumer,” he said. Njoroge said CBK will release ‘data’ on the impact of interest rates in August to see what effect the capping has had on the economy.
“We will be releasing data on the interest rates, hopefully within one month,” said the governor. The governor also said that banks are adopting the new models aimed at cutting costs and also adopting more cost-effective measures to reach their customers which would see bank closure as a thing of the past.
Njoroge said a number of banks are adopting the digital revolution, internet, mobile and agent banking which are more cost effective as compared to brick and mortar. He predicted a 5.7 per cent economic growth rate in quarter one of 2017 driven mainly by manufacturing, mining, hotel and restaurant, information and communication, transportation, real estates and trade sectors.
He said inflation is expected to ease below the government’s target due to fall in food prices, while the foreign exchange market continues to reflect seasonal trends and remains relatively stable.
“The 12-month current account deficit widened to 6.2 per cent of Gross Domestic Product in May from six per cent in March due to short-term imports of cereal, sugar and Standard Gauge Railway-related transport equipment,” said Njoroge. The governor said dynamism in non-agricultural sectors has made it possible for growth to be realised.
There has been a recovery in inflows of tourism and the composition of tourists had also changed with visitors making repeat visits. Njoroge expected the current account deficit to narrow in the second half of this year in part due to resilient tea and horticulture exports, stronger diaspora remittances and continued recovery in tourism.
The shilling was firm against the dollar yesterday with traders expecting the trend to continue after intervention by CBK, saying the bank appeared to have drawn a line in the sand.
The governor assured that Kenya’s foreign reserves were adequate and discouraged currency speculation ahead of elections. As at noon yesterday, commercial banks quoted the shilling at 103.95/104.05 per dollar, compared with 103.85/104.05 at Monday’s close.