•The Kenya Bankers Association says most banks have not yet readjusted their new pricing on commercial loans
•The cost of credit website shows most lenders' interest rates are at the 13 per cent, offered before the law capping interest rates was overhauled
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Banks are yet to validate their total cost of credit after interest rate cap law was scrapped, putting borrowers in a state of limbo.
The cost of credit website by the Kenya Bankers Association was introduced to help borrowers determine rates offered by different lenders to help them chose the most appropriate offerings for their financial needs.
However, after visiting the website, the Star found that the majority of banks registered on the platform are yet to revise their interest rate offerings.
“This means most banks have not yet readjusted their new pricing on commercial loans,” KBA chief executive Habil Olaka said. “Once loans are priced the individual banks post their rates on the cost of credit website.”
Although KBA chairman Joshua Oigara said interest rates would go up to 16 per cent once the law was overhauled, a number of borrowers who have already tried to access credit facilities say banks are charging up to 17 per cent interest on commercial loans.
On accessing KCB Group’s website, the Star found that personal loans would be subject to interest of 13 per cent (CBR rate nine per cent plus the bank’s variable margin of four per cent).
The loan would also be subject to negotiation fees of 2.5 per cent and other fees including insurance premium, security and documentation fee to be advised by the borrowers' personal branch banker.
Last week, Sidian Bank was criticised after a staff memo leaked showing the lender would charge an interest rate of up to 19 per cent on most loans including those advanced to small and medium enterprises, retail customers and mobile loans.
“Following the signing of the Finance Bill into law by the President, which among other provisions repeals section 33b of the Banking Act that provides for the capping of bank interest rates, the bank has reviewed interest rates for various products based on the associated credit risk,” said Sidian Bank Chief Executive Chege Thumbi in a memo to employees dated November 8.
The memo showed large enterprises were set to enjoy the cheapest rates of 16 per cent. The bank however later denied increasing the interest rates.
On the lender's website, microfinance individual loans are currently being priced at 14 per cent with appraisal and disbursement fees at three per cent and Sh1,000 chattels registration.
Individual loans offered by Family Bank are currently priced at 13.5 per cent, as per the lender’s website.
Co-operative Bank of Kenya has however opted to maintain the existing 13 per cent interest on all existing loans.
“We are pleased to advise all our customers that Co-op Bank is meanwhile retaining existing interest rates for all our outstanding loans based on existing money market conditions,” Co-op Bank managing director Gideon Muriuki said in a statement.
According to Olaka, lenders are still trying to relook at their pricing models so they can readjust them in accordance with the borrowers’ risk profiles and needs.
“They will not price a number that is above the 16 per cent rate as you have heard the KBA chairman say,” he said.