Regulator received a seven point Memorandum of understanding from the banking sector outline several steps banks commit in efforts to lower interest rates.
By Ben Oduor
The Kenya Bankers Association (KBA) on Wednesday presented a Memorandum of Understanding (MoU) to the Central Bank of Kenya (CBK) that seeks to stem high interests’ rates charged by local banks.
The memorandum commits to a seven-step plan that includes banks commitment to reduce rates and notify their customers in line with the Kenya Bank’s Reference Rate (KBRR). They also agreed to drop the customer account closing charges in order to make it easier for customers to shop around and transfer accounts from one bank to another.
The banks also reiterated readiness to allocate KSh30 billion to enhance financial access for SMEs, from which Ksh10 billion would be allocated to women and youth-owned micro enterprises, with the fund’s lending rates being concessionary and not exceeding 14.5 per cent.
Also, it notes that banks shall commit to set up a KSh100 million technical assistance program for micro, small and medium-sized enterprises, whose implementation will be overseen by a governance framework that includes sector stakeholders.
The document also notes that banks will use the credit reference bureau framework, together with the product type and loan tenors to start classifying their borrowers into the categories of low, medium and high risk in a bid to reward low-risk borrowers with lower interest rates.
And to enhance ethics, governance and banking practices, the industry will work with KPMG, an independent audit and assurance firm.
Habil Olaka, KBA’s CEO said the memorandum also proposed other initiatives that the government and private sector should continue to work in a bid to lower the cost of credit and enhance financial literacy and consumer protection.