Bank loans

Keep bank loans and fees fair

Editorials

Keep bank loans and fees fair


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Summary

  • While it’s normal for banks to be allowed to protect their assets against risk, it’s important to remember how we got here.
  • Fairness should extend to the fees they charge on their products and services, which they have relied on to sustain profit growth.

Banks have started to get their risk-based lending plans approved by the Central Bank of Kenya, which will allow them to adjust their rates upwards to cover borrower risk.

They have been calling for these adjustments for more than two years, arguing that failure to let them factor in risk is to blame for weak credit growth to the private sector.

While it’s normal for banks to be allowed to protect their assets against risk, it’s important to remember how we got here.

There were concerns about predatory lending practices by banks which at one point saw Parliament cap their lending rates.

It is therefore important that lenders demonstrate good faith and ensure fairness in setting their rates, avoiding the temptation to extract super profits.

This equity should extend to the fees they charge on their products and services, which they have relied on to sustain profit growth.

These charges must now be moderated when lenders are finally allowed to charge higher interest rates by the CBK, to avoid imposing an unsustainable total cost of credit on their customers.