Banker pegs lower rates to technology

September 15, 2009

, NAIROBI, Kenya, Sept 15 – The adoption of technology in banking operations will determine a bank’s lending rates, according to an industry player.

NIC Bank Group Managing Director James Macharia said on Tuesday that technology leads to reduction of the overall cost of service delivery to customers, and would thereby influence how banks reduce their lending rates.

“With enhanced technology, there will be economies of scale and with that we can look at the total cost of delivering services and in the near future, reduce the cost of lending.”

Mr Macharia acknowledged that there was mounting pressure from stakeholders for all banks to reduce their rates but cautioned that banks would first consider their profitability.

“We have to look at the lending rates in the context of overall cost of delivery to customers.”

The Monetary Policy Committee recently slashed Central Bank of Kenya’s Cash Reserve Ratio (CSR) and Central Bank Rate (CBR) but banks have been slow to pass on the benefits to consumers.

This has probed intense lobbying by Central Bank of Kenya (CBK) Governor Njuguna Ndungu and Prime Minister Raila Odinga to implement the same but banks have been slow to react.

Already Standard Chartered Bank has lowered the cost of borrowing personal loans by 3.75 percent.

Many in the banking sector believe CBK would have to be consistent in maintaining the rates low to attract more banks to lower theirs.

Mr Macharia  however added that he did not see any more banks lowering rates this year.

“Most of us are looking at this year and giving it three to four months to see how the year ends before deciding lowering rates.”

He was speaking during the launch of the bank’s Mobile Banking Platform.

Mr Macharia underscored the need to have “a robust technologically-driven banking offering” to link customers with the global market.

“When we invest in technology we are looking towards the future where more people will choose NIC as their bank of choice.”

He believes the mobile service would be crucial in offering value added services to customers.

Also speaking at the launch NIC director for personal banking James Wainaina noted that mobile phones had become a personal and intimate part of life as customers continually interact with their phones.

“We are taping into an opportunity to make banking part of our customers’ lifestyle in a uniquely convenient and efficient way.”

Communications Commission of Kenya statistics project mobile subscribers to be close to 18 million.

He said the mobile banking service would reduce the bank’s operational costs, boost revenue and inevitably pave the way for the bank to lower its own banking rates.

NIC Mobile banking service will have a maximum transaction of Sh500,000 per day.


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