Banks fall short of transparency test by Kenyans, study reveals
- Only 80 per cent of respondents indicated that banks typically explained the terms and conditions of their banking products.
- Banks are effectively some way out to achieving the sector’s desired openness as enshrined in the Banking Sector Charter.
- Pressure has however mounted on banks to overhaul their openness to clients following November’s repeal of interest rate caps.
Local banks have fallen short of the transparency test by customers on the pricing and documentation of products and services, a new survey shows.
According to the survey published last week by the Kenya Bankers Association (KBA) only 80 per cent of respondents indicated that banks typically explained the terms and conditions of their banking products.
Moreover, out of the 80 per cent, 21 per cent reported a need for banks to better explain their product’s terms and conditions.
From the resulting consumer correspondence undertaken between August 6 and September 30, 2019, banks are effectively some way out to achieving the sector’s desired openness as enshrined in the Banking Sector Charter adopted in March last year.
The Central Bank of Kenya (CBK) moved to enforce the Charter in 2018 as the banking sector came under the heat of numerous customer complaints which yielded in the introduction of interest rate caps in September of 2016 by Parliament to tame predatory behaviour by lenders.
The Charter is anchored down on customer centricity to include risk based credit pricing and ethical financing. lenders are as such required to establish key fact statements on the pricing of products and provide rapid and real-time feedback to customer complaints.
Pressure has however mounted on banks to overhaul their openness to clients following November’s repeal of interest rate caps which allowed banks to determine interest rates charged on customer loans from a previous mandatory hold.
As such lenders have grown increasingly aware of the need for a responsive industry to customers by re-writing past wrongs.
“The plan seeks to reduce the cost of credit, enabling more citizens to access formal credit in what will deepen financial inclusion in the economy,” noted KBA Chief Executive Officer Habil Olaka.
CBK Governor Patrick Njoroge has emphasized the need for clear vision in ensuring banks don’t revert back to their old ways in the aftermath of the interest rate caps lift.
“They have no choice but to work for and with Kenyans. With the clear vision that is operationalised in the Banking Sector Charter, this time it will be different,” Dr. Njoroge said in an op-ed published on November 25.
Banks have been compelled by the regulator to submit time-bound plans to comply with the charter with the CBK monitoring implementation.
Further, the lenders are compelled to file new interest rate charged to customers on a monthly basis.
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