The Kenyan banking sector is said to be one of the most profitable ventures in Kenya despite the challenges in the economy coupled with the high cost of doing business.
There are more than 42 banks in Kenya serving a bankable population of about 12 million making Kenya an “over-banked” economy.
For years, Kenyan banks controlled their own businesses in terms of setting their own interest rates for Kenyans who took loans from them.
At one point, the interest rates for some banks skyrocketed to as high as 27 percent, leading to an outcry among Kenyans.
The rise in interest rates forced the National Assembly to formulate the Interest Cap Law that banks protested saying “it was hurting their business.”
During the period, under the interest cap, however, no bank, apart from the National Bank of Kenya reported a loss. All other commercial banks made profits.
At last, the banks had their way. The interest cap was repealed and once again, commercial banks were given the freedom of setting their own interest rates on loans.
Kenyans with existing loans were scared that commercial banks would grab the opportunity to revise the interest rates on existing loans. Aware of this, many banks moved to clarify that the interest rates on existing loans will not be changing any time soon.
Now, think of this. Did you know that apparently, in Kenya you have to pay your bank for it to give you a note showing that your bank account is active? And it is not small money.
“Why do I have to pay 2,400 shillings for you to give me a three-paragraph letter showing that my account is active?” I asked my bank, Spire Bank on Chester House.
“Because it is the policy of the bank,” answered an equally rude lady at the inquiry desk.
For a bank to charge this amount of money for account holders is equivalent to a robbery in broad daylight. The Kenya Bankers Association has remained mum on the issue saying banks have different ways of dealing with their customers.
Dear @KenyaBankers, I think you need to review this: why do I have to pay for my bank to write me a letter to prove that my account is active? Why do I have to pay 2,400 shillings a 2 paragraph letter?
— juma G. 🇰🇪 (@jumaf3) November 19, 2019
For SMEs and individuals to work and supply to agencies and some corporations, the supplier is required to have a letter from the bank indicating that indeed he/she has an account and that it is active. Banks have taken this opportunity, calling it an “opinion letter” charging more than 1,000 shillings for it.