Data from the Kenya Bankers Association (KBA) cost of credit indicates that Tier one banks, in terms of assets and customer base, are offering borrowers the most expensive loans compared to Tier 2 and 3 banks.
Cytonn Investments observe that “The Cheapest Banks having an average Annual Percentage Rate (APR), of 15.1 percent (same as in July 2017), with the Most Expensive Banks having an average APR of 18.7 per cent (20 bps lower than 18.9 per cent in July 2017).”
In the analysis on the total cost of credit at 19 percent compared to the legislated cap at 14 per cent, Cytonn sought to analyse the true cost of credit, initiatives put in place to make credit cheaper and more accessible, the impact on private sector credit growth, and what more can be done.
They find out that, Equity Group, Barclays Bank of Kenya, NIC, KCB Group top the list of lenders with the highest total cost of credit, while bottom-tier banks Victoria and Guaranty Trust Bank (GTB) offer the cheapest loans.
“The total cost of credit is remains high, given the excessive fees being charged by large portions of the banking sector, with these additional costs accounting for 13.7 percent of the total cost of credit (Annual Percentage Rate) in the sector, meaning that 13.7 percent of the total lending rate is attributable to additional costs, hence the APR has remained consistently above the 14.0 percent cap, at 16.7 percent, over the last 6-months, and,
The larger banks in the industry, which control a substantial amount of the loan book, are the costliest, and hence are able to sway the market, given the low customer bargaining power,” notes Cytonn.
The Central Bank of Kenya (CBK) and Kenya Bankers Association (KBA) set up a website (www.costofcredit.co.ke) on which all banks publish the annual percentage rate (APR), loan repayment schedule and any additional cost of credit on their loans.
The website/App allows customers to search and compare loans with the best interest rates. Additionally, the platform also provides a repayment schedule which can be downloaded from the website by the users.