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Developments in the Kenya Banking Sector

22 Jul

Kenya Bankers Association (KBA) has launched a new tool that borrowers can use in making decisions on borrowing which have seen commercial banks in Kenya adopting the  Kenya Banks’ Reference Rate (KBRR) and the Annual Percentage Rate (APR) will enhance pricing transparency while stimulating competition within the banking industry. APR is made up of an interest rate component that is derived from KBRR plus individual banks’ administrative costs and product related fees, a risk premium and the banks’ profit margin; as well as related third party costs. The formulas for these rates formula were developed as an outcome of discussions between the stakeholders, Commercial Bank of Kenya and led by the National Treasury as a measure to bring down the cost of borrowing in the country. These rates will be overseen by the Cost of Credit Committee which will ensure that banks disclose all the costs that go into the pricing of a loan. The overall vision is to allow for an efficient and clear credit system and also enhance access to credit. Standard Chartered Bank Kenya Limited has become the first bank to lower its lending rates to 14.9 per cent, based on the new benchmarks and the rest of the banking fraternity is expected to shortly follow suit. This follows a successful two-month pilot period during which  member banks tested the model within their institutions. The government plans to release a list of expensive lenders every week in a bid to encourage conformity with the new rates. There are also plans to expand credit information sharing beyond member banks to all regulated banks and other entities, including non-bank credit providers, utilities and mobile network operators.

In order to increase public awareness the Cost of Credit Website has been launched, www.costofcredit.co.ke, which will allow members of the general public quick access to the credit calculator and this is also available in app either from google play or the website.

 
 

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