Banks pledge to cut rates in August
NAIROBI, Kenya, Jul 11 – Commercial banks have pledged to cut their lending rates from next month, in line with reduction of the Central Bank rate last week.
Chairman of the Kenya Bankers Association, Richard Etemesi, however said the rates are unlikely to drop by a big margin as other factors that contributed to the hike were still being felt in the market.
“A lot of the commentators said the rates should go down now. I can tell Kenyans to expect an adjustment in the base rates, by the end of the month or at the beginning of next month,” he said.
Last week the Central Bank’s Monetary Policy Committee signaled banks to lower their borrowing rates after reducing its key lending rate that determines the cost of credit from 18 percent to 16.5 percent.
Barclays Bank was the first to drop its base rate by 1.5 percent margin from 22.5 percent to 21.
Etemesi has however assured borrowers who had renegotiated their loan tenures that banks will retain the period until the rates drop to more affordable levels.
“If a customer comes up and says because of lower interest rates I want to reduce the repayment period, I don’t think any bank could object that. After all it will be to the benefit of both the bank and the customer,” he assured, “so the restructuring process that we put in place – to alleviate Kenyans form high rates – does not change,” he assured.
KBA CEO Habil Olaka added that the banks are still working on a formula on which to disclose information about credit to consumers, to help them make proper decisions while taking loans.
“The big question is what you disclose. When you disclose for example the rates of two banks, one with a base rate of 16 percent, and the other with 18 percent, does it mean that the bank with 16 percent is the cheaper or is it the other one? “said Olaka.
The two were speaking during the re-branding of the Association and launch of a new website.
“As the Association prepares to mark its 50th anniversary, we are seeking to a more enhanced engagement with all stakeholders in the sector. We hope to interact with our customers on our website and address the various questions they may have, “added Olaka.
The unveiling of the new look KBA was covered via LIVE Stream by Capital FM TV.