Standard Bank adopts KBRR rates

By Regina Manyara

The bank has adjusted its lending rates under the new format, offering mortgage at 10.9 percent

Standard Chartered Bank has become the first financial institution to officially adopt the Kenya Bankers Reference Rate in lending.

The Central Bank introduced the Kenya Bankers Reference Rate in a move aimed at reducing lending rates.

The Central Bank’s monetary policy committee last Tuesday set the Kenya Bankers Reference Rate at 9.13% to drive down the cost of credit.

Under the new KBRR, financial institutions are required to disclose the breakdown of any deviation in the KBRR, thereby enhancing transparency in the pricing of credit and mortgages.

The bank has adjusted its lending rates under the new format, offering mortgage at 10.9 percent.  Loans will be priced at 14.9%.

According to Bhartesh Shah, the Head of Retail East Africa, KBRR would increase customer demand for various products that were otherwise unaffordable.

Under the new interest rate regime, all new loans issued after last Tuesday will be priced using the KBRR framework while transition for one year will provided to allow banks recalculate the existing loans.

However, even as the move to switch computation of lending rates on KBRR plus the margin is set to enhance provision of cheaper credit as well as offer transparent and competitive credit pricing, critics are worried that the move will push the small banks out of the market.

This is because unlike large financial institutions that mobilize savings for lending, small banks borrow to advance.

This means small financial institutions would find it hard to effectively offer competitive rates unlike large banks.