Kenyan banks are known to be some of the most expensive in terms of provision of credit. Kenyans are not able to compare interest rates due to ignorance, the unavailability of information, and the inconveniences associated with moving from bank to bank in order to get their terms of credit. This is now set to change with the Central Bank of Kenya (CBK) having started to publish the various banks lending rates.
On its website, the Central Bank of Kenya has published the average lending rates for various loan products by banks as well as the overall average weighted lending rates by the commercial banks. This will promote transparency in pricing of credit by the commercial banks and give customers reliable information to evaluate which banks have the friendliest lending rates. This is also likely to trigger healthy competition among the lenders to the benefit of borrowers.
Based on the average of the overall weighted lending rates, the banks with the highest rates over the 2nd half of 2015 were K-Rep Bank Ltd, Jamii Bora Bank Ltd, Middle East Commercial Bank Ltd, Chase Bank of Kenya Ltd, Guaranty Trust Bank Ltd, Credit Bank Ltd, Barclays Bank of Kenya Ltd, Consolidated Bank Ltd, NIC Bank Ltd and Transnational Bank Ltd with the rates ranging between 24.0% and 18.6% respectively.
The bottom ten representing those banks with the lowest lending rates is taken by CfC Stanbic Bank Ltd, National Bank of Kenya Ltd, Kenya Commercial Bank Ltd, Standard Chartered Bank of Kenya Ltd, Habib Bank A.G. Zurich, UBA Bank Kenya Ltd, Family Bank Ltd, Housing Finance Company, Citibank N.A, First Community Bank Ltd, Guardian Bank Ltd. Their rates range between 15.8% and 12.4% respectively.
It is however important to note that the published interest rates by the Central Bank of Kenya are the average weighted lending rates for each type of loan product and the overall average weighted lending rates for each bank as at the end of a specified time period. As a result, the actual rates charged by the banks may be higher or lower than the published average rates. The actual rates are based on negotiations between the bank and the borrowing customers.
In addition, banks may levy other fees and charges, including administration fees, processing fees, valuation fees, legal fees and commitment fees, among others making the effective rates charged by individual banks higher than the published interest rates. It would therefore be important to ask around before settling for a particular lender for a loan.