Among Kenya’s tier-one lenders, I&M Bank and Standard Chartered have the highest cost of credit, with external or third-party charges proving a key differentiator in the cost of loans among the large banks.
According to the Kenya Bankers Association (KBA) and the Central Bank of Kenya (CBK) cost of credit website, a borrower taking a Sh1 million personal unsecured loan from I&M for one year will incur a total credit cost of Sh127,140.
A similar loan at StanChart costs Sh117,745, while Equity Bank charges Sh114,057 and Co-operative Bank charges Sh111,929.
These fees include debt interest as well as other internal and external charges like bank fees, legal fees, insurance, and government levies.
According to the site, the lowest credit cost is on an Absa Bank Kenya loan, which costs Sh76,147. It does not, however, indicate whether the loan is subject to bank or external charges.
The other four lenders charge loan fees ranging from Sh95,807 (DTB) to Sh107,207 (KCB).
According to the CBK’s bank supervision report for 2021, tier one lenders have 12.65 million loan accounts on their books, accounting for 97 percent of the total in the banking sector. They also control 75% of total industry deposits and assets.
In mid-2017, the publication of information on the cost of credit for personal loans and mortgages on a single web platform began, with the goal of making it easier for customers to choose between lenders when seeking credit.
Prior to this, comparing loan prices between different banks was difficult for bank customers, who had to move from one institution to another when shopping for a loan.
There is a limited spread in terms of interest on loans among the tier one banks based on the current published loan prices, with the variance coming from bank charges and external fees.
Interest is charged at 13 percent by KCB, Equity, NCBA, and DTB, 14.3 percent by I&M, 14 percent by Stanchart, and 13.77 percent by Absa and Stanbic.
DTB has the lowest non-interest costs at Sh24,000, while I&M loans have the highest charges at Sh48,000.
Due to their limited ability to raise interest rates before having their risk-based pricing models approved by the CBK, lenders have turned to non-funded income from such charges to drive revenue.
Only Equity Group has disclosed that it has received pricing approval, but the CBK announced yesterday that more than half of the banks’ risk-based models have already been approved or signed off with the regulator.
These approvals will allow banks to vary credit interest rates based on a borrower’s risk profile, resulting in increased credit access across the economy.
