Kenyan Banks to become more transparent about pricing
Commercial banks in Kenya have started implementing the pilot Annual Percentage Rate (APR) pricing mechanism, which will enable consumers to compare different bank loan costs.Commercial banks in Kenya have started implementing the pilot Annual Percentage Rate (APR) pricing mechanism, which will enable consumers to compare different bank loan costs.
When the new mechanism takes effect on 1 July, banks will disclose the total costs associated with the loan, the loan repayment schedule and the APR, which takes into account the interest rate component, bank charges and fees, and third party costs including legal fees, insurance costs, valuation fees, and government levies, Capital FM reports.
Until now, banks were only required to provide loan applicants with a repayment schedule and a
breakdown of the total cost of credit that
bank charges and third-party costs.
Kenya Bankers Association's CEO, Habil Olaka said the APR system will stimulate competitive loan interest rates and promote consumer protection by standardising disclosures during the loan application process.
"As an industry, we are enhancing pricing disclosures in order to enable bank customers to make more informed choices. This is one of the mechanisms embraced by banks to address issues relating to easing access to credit," he said.
This new regulation is the result
of the government's
efforts to streamline the banking industry and increase transparency to boost access to finance.
And these efforts seem to have paid off, with the FinAccess 2013 survey results revealing that Kenya’s financial inclusion landscape has undergone considerable change. The proportion of the adult population using different forms of formal financial services stands at 66.7 percent in 2013 compared to 41.3 percent in 2009.