Banks to show cost of credit on a new website next week

Central Bank of Kenya (CBK) Governor Patrick Njoroge. FILE PHOTO | NMG 

By CHARLES MWANIKI

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Summary

• Commercial banks will publish the annual percentage rate (APR), loan repayment schedule and any additional cost of credit on their loans.
• The website has been running on a pilot basis, where it has only been accessible to banks, but will be made available to the public next week.

Banks will from next week publish information on the cost of credit for personal loans and mortgages on a common web platform, making it easier for customers to choose between lenders when seeking credit.

The Central Bank of Kenya (CBK) and Kenya Bankers Association (KBA) have set up a website (www.costofcredit.co.ke) on which all banks will publish the annual percentage rate (APR), loan repayment schedule and any additional cost of credit on their loans.

CBK governor Patrick Njoroge on Tuesday said the website has been running on a pilot basis, where it has only been accessible to banks, but will be made available to the public next week.

“This will resolve the information asymmetry that customers have been having on the pricing of loans by different banks. It will afford them a way of window shopping for loans before they go to a bank,” said Dr Njoroge.

“Initially this will cover personal loans and mortgages, with other types of credit to follow,” he said.

The governor said that the move is meant to keep the cost of credit affordable. Banks will now be required to also put up links of the new portal on their websites, making it easier for their customers to access the information.

The cost of credit and access to information on pricing of loans has for long been difficult for Kenyan bank customers, who have been forced into tedious physical movement from bank to bank when comparing the cost of credit between lenders.

This opacity has left customers saddled with expensive credit when there are cheaper alternatives elsewhere.

It remains to be seen though if clients will easily circulate between banks.

Efforts have been made in the past to control the runaway cost of credit; the latest is the rate cap on loans at no more than four percentage points above the prevailing Central Bank Rate.

Prior to the rate cap, the government had introduced the Kenya Banks Reference Rate (KBRR), which aimed to provide a base cost of loans on which the lenders would then load a premium.