Pressure on commercial banks to lower interest rates on loans on the back of a relatively favourable fiscal environment, is set to pile further after the Central Bank of Kenya announced plans to make public information on rates charged by the lenders.
CBK governor Patrick Njoroge said the move is aimed at empowering borrowers and investors so that they can make informed decisions while applying for credit.
“In the next few days we will publish on our website interest rates of all commercial banks. It will be for three or four quarters so you will see what they did in March, June, September and December,” Dr Njoroge said in an interview with NTV on Wednesday.
This came after the Competition Authority of Kenya moved to investigate anti-competitive behaviour in Kenya’s financial sector, such as restrictions on account switching and sharing of customer data without consent.
On Wednesday, the agency announced appointment of Macmillan Keck Attorneys & solicitors and Acacia Economics to carry out a market survey on the banking sector.
Banks have been on the spot for failing to cut interest rates on loans in the face of an improved fiscal environment marked by relatively low Treasury Bill rates.
In the interview, Dr Njoroge who has in the past asked borrowers to walk out of banks that have refused to cut interest rates, said fostering transparency in pricing of loans would enable Kenyans to avoid the costly lenders as soon as they identify them.
“Information is power and here we are empowering the citizens … quite often you have no clue what this bank is charging on average and it’s your bank ... You know what you are being charged for your own loan but does it compare with the rest of the banks for that class of loans?” he asked.
Analysts and lobby groups swiftly welcomed the move, saying the tactic was likely to force some banks to pass on Central Bank rate cuts to their customers.
“It’s a “name and shame” strategy. The central banker is showing he appreciates “soft power” and this a perfect example of that,” said Nairobi-based investment analyst Aly-Khan Satchu.
The Consumers Federation of Kenya, (Cofek) Secretary General Stephen Mutoro termed the move “a welcome step in transparent pricing” but added that the regulator needs to do more to force banks to disclose hidden charges.
In addition to making data public, Dr Njoroge said in the interview CBK is considering modifying the Kenya Bankers Reference Rate framework to increase its transparency in the pricing of loans.