THE Competition Authority of Kenya has hired a consultant to investigate any anti-competition practices in the banking industry that locks in customers.
Director-general Wang'ombe Kariuki says the consultant, whom he did not disclose, will assess the possibility of challenges consumers face, including costs of closing an account, conditions attached and “any behavioural biases that may lead to consumer inertia” to switch banks.
The probe will seek to “uncover the extent to which the barriers, if any,… relate to competition in the banking sector and the extent to which they could be addressed by regulatory action by the Authority and other government agencies”, Kariuki said in a notice in the Kenya Gazette last Friday.
The consultant has been instructed to establish “any deficiencies that exist in disclosure and sales practices by provider segments including deficiencies that are as a result of not presenting product information in the way that consumers want”, he added.
The new probe is the second phase of ongoing inquiry into possible anti-competition practices in the industry which has long been accused of colluding to hike cost of loans.
The first phase, which started in May 2014, was done by South Africa's Genesis Analytics and sought to establish if the market structure encourages competition.
Kariuki said on December 10 that the survey by Genesis Analytics found the banking industry structure to be adequate in enhancing competition.
The second phase will further shed light on the operations of the three licensed Credit Reference Bureaus “and if there exists disparate treatments that gives them anti-competitive advantage and inhibits consumers' ability to take advantage of their own data for financial access”.
Lenders have been under fire from both the government and the Central Bank for high cost of loans that has slowed down growth.
CBK governor Patrick Njoroge on January 21 questioned the rise in interest rates to a weighted average of 17.4 per cent in December from 17.2 per cent in November despite an improvement in the macroeconomic fundamentals.
“This increase is more pronounced with the large banks. That is troubling because the large banks with more liquidity and deposits are the ones that are increasing their rates, instead of lowering it, even more than smaller banks,” he said. “We will have to deal with this, there's no doubt about it.”