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CBK urges banks to tone down pure drive for profit public good

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Central Bank of Kenya Governor Patrick Njoroge
Central Bank of Kenya Governor Patrick Njoroge. FILE PHOTO | NMG 

Kenyan banks must learn to balance the drive for profits against the public good, Central Bank of Kenya (CBK) Governor Patrick Njoroge has said, in the latest of his many pronouncements on the raging interest rates caps debate.

Dr Njoroge, who spoke at a Kenya Bankers Association (KBA) forum, accused lenders of ravenously pursuing profit while ignoring the dire need for innovative banking solutions that are relevant to ordinary Kenyans.

“The reason there is such palpable disappointment – and I dare say it extends to anger – against you in this room is exactly that. Wanjiku feels that her banker prefers expediency to empathy. That you would rather hunt for a loophole to pursue your interests than show leadership. Would rather seek supernormal profit than search for solutions,” he said.

KBA is holding its Seventh Annual Research Conference whose opening Dr Njoroge officiated. The two-day event brings together banking experts and stakeholders to deliberate on ways in which the financial system can “promote efficient credit allocation to the economy.” Dr Njoroge insisted that the lenders must step up the quest for solutions to financial challenges that ordinary Kenyans face.

“The old adage about the banker asking for their umbrella back when it starts raining may have been funny once, but not when the rain is this heavy, and when Wanjiku already has a flu.”

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Global consultancy McKinsey in March ranked Kenyan and other African banks as the second most profitable globally.

Africa’s banks were found to have an average return on equity (ROE) — a measure of profitability — of nearly 15 per cent last year while those in Kenya registered a higher figure of 24.6 per cent on the basis of data from 2016 when a law capping interest rates was passed.

Kenyan banks collectively earned Sh58.6 billion net profit in the six months ended June, representing a 12.7 per cent growth in defiance of the two-year interest rate caps that limit margins chargeable on customer loans. The results effectively meant the banks have returned to the levels of profitability they had before the interest rates chargeable were capped.

Kenya’s interest rates are capped at four percentage points above the central bank’s benchmark rate in an attempt to limit the cost of borrowing for businesses and individuals.

The move has, however, had the opposite effect of making credit inaccessible to individuals and small business whom the lenders have argued carry higher risk than the current pricing.

Dr Njoroge, who is a staunch opponent of the rate cap, has lobbied for a return to a regime that allows commercial banks to put a risk premium on customer loans for self-assessed probability of default.

The Consumer Federation of Kenya (Cofek) has, however, said the proposed pricing model amounts to giving banks the leeway to set own high rates.

Parliament last month rejected Treasury secretary Henry Rotich’s attempt to repeal the caps.

Banks are expected to raise lending rates once the sector is returned to a liberalised regime.

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World Bank pushes G-20 to extend debt relief to 2021

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World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.

“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.

He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.

The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.

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People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.

For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.

Debt burdens, already unsustainable for many countries, are rising to crisis levels.

“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.

ALSO READ:Global Economy Plunges into Worst Recession – World Bank

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Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans

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The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.

“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”

According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.

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Tighter Reins on Platforms for Mobile Loans

The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.

Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.

Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.

SEE ALSO: Central Bank Unveils Measures to Tame Unregulated Digital Lenders

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Scope Markets Kenya customers to have instant access to global financial markets

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NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options. 

This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.

The Scope Markets app offers clients over 500 investment opportunities across global financial markets.

The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.

The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).

The platform also offers an enhanced client interface including catering for those who trade at night.

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The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour;  Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).

The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.

Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”

He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.

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