Since the liberalisation of interest rates charged by banks in 1990’s, huge spreads have been witnessed in several instances. Banks explained that the huge spread was due to macroeconomic instability characterized by high inflation, unstable foreign exchange rates, high cash reserve requirement and slow economic growth leading to high incidences of nonperforming loans.
Though Central Bank of Kenya supports the determination of interest rates by market forces, it expects the interest spread to be narrowed by market discipline especially given the relative macroeconomic stability since 2000, drop in level of nonperforming loans and reduced cash reserve requirement has also been reduced. With these improvements, institutions are expected to respond by reducing their interest rate spreads; but the spreads remain relatively high.
As a result one way the Central Bank of Kenya is addressing this is by Communication of bank charges, interest rates and lending rates for all banks as a means of promoting market discipline and competition among the players. This is done by carrying out a quarterly survey on bank charges, interest rate and lending rates and holding a launch of the same. This is aimed at educating the public to afford them an opportunity of making informed banking decisions.
The quarterly survey results for the surveys on bank charges and lending rates are attached:
Commercial banks make regular returns on interest rates, fees and charges to the Central Bank. Using these
figures and the number of transactions which the average user makes in a month, we can readily calculate the
average cost of using the service for each bank. These are the figures presented in this survey.
Survey Bank Charges and Lending Rates December 2008
Survey Bank Charges and Lending Rates June 2008
Survey Bank Charges and Lending Rates December 2007
Survey Bank Charges and Lending Rates March 2007