Dhiren Rana

CEO's Profile

Theme |
Topic | Industry Proposals on Reducing the Cost of Credit
MONTH | September 2014

Discussion Focus Area:

  • Interest Rate Trends
  • Proposals to Address High Interest Rates & Industry Interventions

Overview:

The banking industry in collaboration with Central Bank is spearheading a number of interventions to enhance credit access. These initiatives, which are at different stages of implementation, include the introduction of the Kenya Banks Reference Rate (KBRR); and the Annual Percentage Rate (APR). Through the Cost of Credit Committee Chaired by National Treasury, KBA has also proposed several other measures meant to address the inefficiencies that contribute to higher costs in lending, including reforms within the Lands and Companies Registries.

Other proposals are the establishment of a legal and regulatory framework to support the creation of an electronic movable assets register; and expanding credit information sharing beyond KBA Member Banks to all regulated banks and other entities, including non-bank credit providers, utilities and mobile network operators.

It is important to note that the high interest rate regime is not permanent; once market stability is attained, rates trend downwards, as we have seen in the recent past. A good signal that the market is indeed responding to the decline in interest rates is the increased uptake in credit during 2013 and First Quarter 2014 (as reported by the Central Bank).