Lamin Manjang

CEO's Profile

Theme | Credit Demand & Accessibility
Topic | Retail/Household Access to Credit
MONTH | June 2015

Discussion Focus areas

  • Household access to credit and cost of credit dynamics
  • Promoting industry competition through pricing transparency (Kenya Banks’ Reference Rate / KBRR, and Annual Percentage Rate)
  • Role of Credit Information Sharing in stimulating retail lending


Interest rate is the price a bank will pay for cash (customer deposits) or capital; as well as the price a bank will charge for a loan (credit or financing). Typically banks raise deposits from individual customers; but more so they raise wholesale deposits from corporate clients and various investors. These wholesale deposits tend to be more expensive for banks; however, a bank will pay a premium (higher interest rate) on a deposit based on the tenure. The bigger the deposit and the longer the tenure, the more leverage the customer has to negotiate a higher deposit interest rate.

There are many internal and external factors that influence both deposit and loan interest rates. These factors include both fiscal policy (how the Government raises capital and finances its annual budget), as well as monetary policy (how the Central Bank of Kenya promotes stability through managing inflation, liquidity in the market, and the value of the Kenya Shilling).

While banks will continue to make efficiency-enhancing investments to the ultimate benefit of borrowers, there are expectations that the policy-related aspects within the Government’s control will be given due attention so as to enable the industry to bring down the cost of credit.

Through KBA, the industry has supported several initiatives to address the risks that contribute to higher costs of banking; the Credit Information Sharing Initiative is one example which will see banks better price their loan products – based on the individual customer’s risk profile. This initiative also minimizes the reliance on traditional collateral, which is a challenge for most.

Another promising industry intervention is enhancing competition and promoting consumer protection through pricing transparency. Towards this end, KBA has adopted a transparent pricing mechanism to facilitate full disclosure on the cost of borrowing to loan applicants.