Central Bank of Kenya Governor Patrick Njoroge. FILE PHOTO | NMG
Summary
- Dr Njoroge, who spoke at a Kenya Bankers Association (KBA) forum, accused lenders of ravenously pursuing profit while ignoring the dire need for innovative banking solutions that are relevant to ordinary Kenyans.
- KBA is holding its Seventh Annual Research Conference whose opening Dr Njoroge officiated.
- The two-day event brings together banking experts and stakeholders to deliberate on ways in which the financial system can “promote efficient credit allocation to the economy.”
Kenyan banks must learn to balance the drive for profits against
the public good, Central Bank of Kenya (CBK) Governor Patrick Njoroge
has said, in the latest of his many pronouncements on the raging
interest rates caps debate.
Dr Njoroge, who spoke at a
Kenya Bankers Association (KBA) forum, accused lenders of ravenously
pursuing profit while ignoring the dire need for innovative banking
solutions that are relevant to ordinary Kenyans.
“The
reason there is such palpable disappointment – and I dare say it extends
to anger – against you in this room is exactly that. Wanjiku feels that
her banker prefers expediency to empathy. That you would rather hunt
for a loophole to pursue your interests than show leadership. Would
rather seek supernormal profit than search for solutions,” he said.
KBA is holding its Seventh Annual Research Conference whose
opening Dr Njoroge officiated. The two-day event brings together banking
experts and stakeholders to deliberate on ways in which the financial
system can “promote efficient credit allocation to the economy.” Dr
Njoroge insisted that the lenders must step up the quest for solutions
to financial challenges that ordinary Kenyans face.
“The
old adage about the banker asking for their umbrella back when it
starts raining may have been funny once, but not when the rain is this
heavy, and when Wanjiku already has a flu.”
Global consultancy McKinsey in March ranked Kenyan and other African banks as the second most profitable globally.
Africa’s
banks were found to have an average return on equity (ROE) — a measure
of profitability — of nearly 15 per cent last year while those in Kenya
registered a higher figure of 24.6 per cent on the basis of data from
2016 when a law capping interest rates was passed.
Banks profit
(Sh bn)
59
2018
101
2014
94
2015
102
2016
96
2017
59
2018
Banks cummulatively registered a profit of Sh58.6 billion in the first half of 2018.
Kenyan banks collectively earned Sh58.6 billion net profit in
the six months ended June, representing a 12.7 per cent growth in
defiance of the two-year interest rate caps that limit margins
chargeable on customer loans. The results effectively meant the banks
have returned to the levels of profitability they had before the
interest rates chargeable were capped.
Kenya’s interest rates are capped at four percentage points
above the central bank’s benchmark rate in an attempt to limit the cost
of borrowing for businesses and individuals.
The move
has, however, had the opposite effect of making credit inaccessible to
individuals and small business whom the lenders have argued carry higher
risk than the current pricing.
Dr Njoroge, who is a
staunch opponent of the rate cap, has lobbied for a return to a regime
that allows commercial banks to put a risk premium on customer loans for
self-assessed probability of default.
The Consumer
Federation of Kenya (Cofek) has, however, said the proposed pricing
model amounts to giving banks the leeway to set own high rates.
Parliament last month rejected Treasury secretary Henry Rotich’s attempt to repeal the caps.
Banks are expected to raise lending rates once the sector is returned to a liberalised regime.
No comments :
Post a Comment