In the past few days, many have been speculating about when banks would pass on the benefits of the rate cut to its existing customers. The banks kept insisting that they were waiting for directions from Central Bank on how to the price existing loans as if the law was not clear enough. CFC Stanbic however, took the lead on this with the announcement that they would price all their new and existing loans at 14.5%.
We have adopted the new lending rate of Base Rate + 400 basis points currently at 14.5% per annum on all new loans & existing facilities.
— CfC Stanbic Bank (@CfCStanbicKE) August 31, 2016
This move quickly won them accolades from their customers and other Kenyans online. One tweep even predicted that other banks would follow suit.
@CfCStanbicKE Well done. You have set the trend. Other banks will surely follow
— Paul Macharia (@shadipaul) August 31, 2016
This I am sure must have come as a shock to the banking industry as CFC Stanbic clearly broke ranks with them in favour of the customer. The Kenya Bankers Association (KBA) which is the industry association for Kenyan banks had no choice but to announce that all the member banks had agreed to reprice their existing loans later in the day.
@KenyaBankers Statement:
Banking Industry Commitment to Pass on Benefits to Existing Customershttps://t.co/xyQimeYhfa #wehearyou— KenyaBankers (@KenyaBankers) August 31, 2016
The following is an extract from their statement;
While the industry awaits Central Bank of Kenya regulations that include direction on the determination of the base rate that the industry will use, the KBA members believe that the spirit of the law was and should be to pass these benefits to existing bank customers.
Consequently, the KBA wishes to announce that its members have agreed to prospectively reprice existing loans, which will see existing customers enjoy the benefits of the new law once it is operationalised. Each KBA member bank will therefore notify their customers on the process and new terms as the industry engages with CBK on the implementation.
We have listened carefully to all the opinions expressed by the different stakeholders in the debate leading to the assenting of this law, and we are committed to implement both the spirit of the law and the substance thereof, as well as meet all the commitments outlined in our 10th August 2016 Memorandum of Understanding presented to the Central Bank of Kenya.
In complying with the law, we will work to minimise any unintended negative consequences on the broader economy, such as a reversal of the positive strides made towards financial inclusion through certain groups of people and SMEs being excluded from access to banking services.
Our member banks will also work to enhance their lending practices and customer service standards to ensure that customers are better served and informed about their financial options.
Get the full statement here.