High cost of financial services hindrance to growth

The cost of financial services in Kenya remains high hindering the growth of the sector.

A report by the financial sector deepening says banks have not adopted a transparent pricing method for various services, thus exploiting customers.

The report says sending money through the real time system is the most expensive at 535 shillings followed by electronic fund transfer at 318 shillings per transaction.

Despite a legal requirement by the Central Bank of Kenya to lenders requiring them to publish tariff guidelines about all their fees and charges, commercial banks rarely comply.

A study done by the financial sector deepening dubbed ‘the Price of being banked in Kenya’ says that comparing costs between banks is the most challenging part while actual costs of products and services are not well clarified.

The report says there is a lot of confusion over the actual cost of different banking products and services.

Bank employees are also accused of withholding crucial information to customers leading to wrong investment decisions.

Withdrawing over-the-counter is relatively expensive at between 140 and 177 shillings depending on the size of the withdrawal.

The highest withdrawal fee observed is 385 shillings while some banks do not charge.

Transferring money through banks also attracts different charges depending on the type and not size of the transaction.

RTGS is the most expensive mode of sending money averaging 535 shillings per transaction followed by EFT at 318 shillings.

Interestingly, withdrawing large amounts over the counter tends to be cheaper compared to small amounts.

This is meant to encourage customers to use the ATM for withdrawing small amounts instead of withdrawing over the counter.

The report says over 50% of bank customers transact once or twice a month; 23% transact four times; and less than 10% transact more frequently.

The annual cost for running a bank account including withdrawals, money transfers and account maintenance fees is extremely diverse running from 3,629 shillings to 13,460 shillings annually.

Closing a bank account ranges from 495 shillings to 1,815 shillings. The study covered 11 banks in Kenya with the largest customer base.

The report is calling for policy interventions to lower the cost of financial services in the country.

  

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