High Interest Rates Discourage Kenyans from Taking Loans

Bank interest rates seem to be a deciding factor for some as 39% of respondents in the latest Infotrak study would opt to discontinue their relationship with banks due to high interest rates, charges and hidden fees that banks impose.

40 % of the respondents who operate a bank account would not consider taking a loan from any commercial bank. A further 94% feel that the current lending rates are too high and shouldn’t exceed 10%. 58% were of the view that commercial banks do not take into account consumer interest when reviewing their loan interest rates, while 51% were not aware that the current lending rates are above 15 %.

Despite the move by Central Bank to cut its base lending rate from 18 per cent to 16.5 per cent, only five banks have announced a reduction in interest rates, a move that discourages some from taking loans.

In light of the above findings, Consumer Federation of Kenya (COFEK) is fighting for interest rate control; a move that was defeated in parliament earlier this year. COFEK also plans to move to court next month to compel banks to disclose their fees and charges.

As posted in K24 Business, Kenya Bankers Association is currently developing guidelines on what banks should disclose to their customers. Responding to a query raised in the ongoing “my 15min chat with a bank CEO” Richard Etemesi, CEO Standard Chartered Bank stated that banks would begin to disclose interest rates as Annual Percentage Rates (APR) in the next three months. The APR is a standardized way of way of declaring interest rates; enabling consumers of financial services make informed comparisons of bank lending rates.

The poll was sponsored by COFEK and conducted by Infotrak Research and Consulting between 19th and 20th July, 2012.

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