Tuesday, June 14, 2005

(Non) Banking Challenges in Kenya

In an interview with the Financial Post, Kenya Commercial Bank’s Chief Executive Terry Davidson lists the four main challenges facing the banking sector as:

(i) Uncertainty over the Banking Bill: Implementation of the “in-duplum” rule, which, if applied retroactively for several years back will wipe out many local Banks.
(ii) Infrastructure: the expensive and poor conditions power, roads and communications needs to be addressed – this will reduce the cost of banking and eventually lead to banking costs for account holders
(iii) Insecurity: KCB spends Kshs. 15 million a month on security guards, which is not prudent. If the security situation improved, Kenyan banks would not have to pay as much for security.
(iv) Judiciary: It takes years for cases to be heard, and all banks have backlogs of pending cases, while others are postponed endlessly.

2 comments:

Anonymous said...

"In-duplum" does not make sense since it only encourages defaulters! Basically, if I accumulate enough (unpaid) interest to equal my original loan, why would I even want to pay it back since after Interest=loan the loan is interest-free! Those in favour of the rule should lend me money!

The high cost of borrowing is also a function of poor/slow court system where banks spend more to clooect the loans than what they make in interest! So they tack on a higher margin for good borrowers.

Costs to keep cash safe e.g. guards, vaults, etc add to fees charged by banks! I saw bank branches in supermarkets in the UK - which cost less to build & maintain than the banking centers in Kenya.

ATMs use phone lines which are difficult to obtain coz of Telkom's inefficieny & expensive! Calls in the UK cost less than 7pence - depending on the deal you get. In Kenya, it costs much more!

bankelele said...

re in-duplum: credit cards charge way more than anyone, and no one complains because it is accepted for what it. it's not fair to limit banks especially since it is a willing informed borrower who signs the agreement.

agreed on the court system, security and telkom costs.

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