By Nicholas Nduati
The banks signed a Memorandum of Understanding with the Central Bank of Kenya on Wednesday to implement measures that will reduce interest rates.
The deal involves banks developing credit scores that will see good borrowers loaned at lower rates as well as promptly reducing lending rates whenever the Central Bank Rate is lowered.
This comes after parliament two weeks ago passed the Banking Amendment Bill 2015 that seeks to cap interest rates on loans at four percent above the Central Bank Rate that has reignited pressure on banks to lower lending rates.
The passage of the Bill seemed to have spurred banks into action which has seen them come up with their own interventions to reduce lending rates.
Banks through the Kenya Bankers Association have developed an MOU that they presented to Central Bank Governor Dr. Patrick Njoroge that commits all banks towards among others canceling account closing charges, immediately reducing interest rates in line with last month’s Central Bank Rate reduction and starting a 30 billion shillings fund for low cost credit to SMEs, women and the youth.
Banks are expected to use information from credit reference bureaus to develop credit scores which will see good borrowers advanced loans at lower rates.
The banks will also enhance financial literacy by among others re-launching the cost of credit website to enable customers compare bank products and put in place an electronic securities register.
They will also set up of a 100 million shillings technical assistance program for micro and medium sized enterprises.