, NAIROBI, Kenya, Jun 17 – As technological innovation continues to take root in the financial sector, the Central Bank of Kenya (CBK) hopes that banks will extend the benefits of lower costs of doing business to the end consumers.
Governor Prof Njuguna Ndung’u pointed out on Thursday that banks were increasingly adopting platforms that have led to cost effectiveness and this should therefore translate into lower transaction costs for customers.
“The sector is strong and it’s perhaps going to register healthier profits this year but this good performance by the banks has to be translated into customer benefits,” he implored.
As at April this year, the industry’s net assets stood at Sh1.5 trillion while deposits increased to Sh1.1 trillion, a growth that has partly been attributed to branch expansion. However, many bank customers have had to meet the expenses of this expansion thus the need to address what the governor called the ‘historic burden’.
High transaction costs in the sector have been cited as one reason why majority of the country’s population still has no access to formal financial services. However the government has stepped in to put in place various interventions that seek to broaden the financial inclusion at a lower cost.
These measures have included the amendment to the Banking Act to allow institutions hire agents through which they can offer their services without being physically present. The introduction of Credit Reference Bureaus to enable banks to share information on their creditors is another move that is expected to lead to a reduction of non-performing loans, which reduces their operational costs.
But even with the implementation of such measures, it remains to be seen whether banks will take the lead and lower their costs. Only recently did competition force them to slash their base lending rates after months of ignoring signals from the Monetary Policy Committee to do so.
Prof Ndung’u however reiterated that the government would continue to pursue policies that support growth in the sector but called on the institutions to take advantage of the ongoing regional integration to leverage the cost of effective distribution networks.
The Governor spoke during the launch of Ecobank’s Transnational Incorporated’s money transfer product dubbed “Rapid Transfer” through which customers in the 30 countries where they have a presence, can access flexible and convenient financial services.
Product Head Rhoda Kariuki said through this product, customers can send or receive a maximum of Sh80,000 ($10,000) at all branches of Ecobank across Africa.
“It’s not merely a ‘cash to cash’ transaction; we can take your money to your account in another country and payment is done in your local currencies so you don’t have to suffer from any foreign exchanges,” she explained.
The bank expressed confidence that this multi-currency card service would alter the payment system in Africa which has already begun to see a revolution following the popularity of the mobile phone solutions.