Banks to source new revenue streams

Commercial banks now face a tough task of re jigging their business models in an effort of reducing reliance on interest income from loans disbursed.

This comes after President Uhuru Kenyatta signed into the Bank Amendment Act, effectively introducing interest rate controls.

With that move bankers will be scratching their heads, think hard of new areas to romp up revenues.

Economists and observers alike have maintained that banks tended to focus more on the spread between loans and deposits, losing sight of other sources of income.

Speaking during a briefing on Thursday, Kenya Bankers Association Chief Executive Officer Habil Olaka said that change in law would undoubtedly lead banks to focus on customer needs and develop products that respond to their needs.

“What we’re going to see is banks becoming very innovative in terms of providing services to customers that initially have mainly been focusing on providing loans,” Mr Olaka stressed.

Banks have been reaping huge chunks of profits from loans and advances posting an overall pre-tax profit of Sh.456.8 billion in 2015. The concern has been that while other sectors in the economy have been struggling to make profits, banks continue to post double digit growth in profits.

Bankers had mounted a spirited campaign even drawing up a seven point plan of attack in an effort of swaying the President from putting pen to paper. That all fell on deaf ears, with the president even calling out banks on their failure to keep to past promises.

Bank customers have however raised concern that banks may re-introduce service charges and ledger fees, something the banking lobby group has been quick to stress won’t happen.

Mr Olaka said that concerted efforts would have to be made by playes in the banking industry to address the factors that make the cost of credit remain high, something he points out the new law does not capture.

“The challenges that have made the cost of credit go up have not been removed like for example the operational costs for the banking sector, the inefficiencies within the various systems, the land registry will still remain with the inefficiencies that we still have, the dispute resolution processes will still remain with the inefficiencies that we still have,” he said.

KBA maintained that it would comply with the new law.