Kenya High Court ruling 'to raise cost of borrowing'

Oct 04, 2010

Kenyans will have to pay more to borrow funds after the country's High Court ruled it is unconstitutional to jail those who default on their debts, one banking group has warned.

Martin Oduor-Otieno, Chief Executive of the KCB Bank Group, was quoted by Business Daily as saying last week's decision will raise costs for banks, as they will find it harder to recover loans from those who have not paid. "Any issue that has material effect on contractual obligations will lead to an increase in the cost of doing business, which will be reflected through higher charges," he was quoted as saying.

And Group Head of Business Management at CBA Bank Jeremy Ngunze noted the cost of unsecured debt in particular will be affected by the court's ruling. The Daily Nation recently noted consumers and private companies in Kenya are paying interest of as much as 15 per cent to borrow from banks, even though they are offering cheaper loans to both the government and other financial institutions.