Finance minister Njeru Githae has continued with his call on commercial banks to lower the rates at which commercial banks give loans to their customers. Githae has been asking banks and other lending institutions to make loans affordable to borrowers citing reduced cost of operations for the banks.
Speaking at the launch of FirstRand Bank representative office in Kenya, Githae said the banking sector had remained strong through tough economic times to post good results. In December 2011, total assets for the sector stood at Kshs. 2.1 trillion while total deposits stood at Kshs. 1.6 trillion and total loans at Kshs. 1.2 trillion. He said that banks were not reciprocating what their customers are doing for them faithfully.
“Banks need to see how they can deliver financial services and products to customers in a more cost effective way so as to contribute to lowering the cost of credit.” Githae said and added that with the fall of non-performing loans to 3%, introduction of innovative banking, including agent banking, adoption of robust banking applications and risk based approach to banking, operating costs for the bank should be on the downward trends.
“Part of the benefits of these cost reductions should be passed on to the banks’ clients.” He said.
The financial bill 2011/2012 was passed minus amendments in it to cap interest rates by parliament last month. The proposal if passed into law would have seen interest rates capped at 22%, the allowable 4 per centage points above the current Central Bank Rate of 18%. This could have effectively reduced the cost of credit.