NAIROBI, Kenya, Jul 12 – The Central Bank of Kenya (CBK) is currently reviewing revised business plans that banks submitted after the regulator issued new operational guidelines in April.
CBK Governor Patrick Njoroge says all banks have submitted the business plans which aim to diversify revenue streams following the interest rates capping that squeezed traditional revenue.
“All banks have provided their business plans, we are now in discussions with them, as you can imagine it’s not just a one-page plan where you spend two hours discussing with them, it’s quite complicated and that’s the journey we are on,” Njoroge told Capital FM Business.
Recent Data from the CBK indicate the caps on interest rates has had a detrimental effect on lending to Small and Medium Sized enterprise that has also seen interest income decline significantly affecting their return on equity.
“Banks need to do better in their business model. We are already working with them and they need to do better in terms of loans so that they are more risk-based. The banks also need to be more customer-centric and the customers also need to be strengthened in terms of information so that they are forearmed before they go to talk to the banks,” Njoroge said.
According to a report by Kenya National Bureau of Statistics, during the first quarter 2017, lower interest rates for commercial banks loans and advances were recorded at 13.61 per cent in March 2017 compared to a high of 17.87 per cent in March 2016, while savings rate rose to a high of 6.81 per cent in February 2017.
The regulator had earlier indicated that the interest rate capping regime is complicating monetary policy as the Government seeks to strike the balance between accessible and affordable credit needed to drive the economy.