The Central Bank and FSD Kenya released a report on bank charges – a summarized version of which is now available from the CBK site.
It is an interesting report based on a survey of several hundred bank customers. CBK used to publish bank charges every quarter in the newspapers from about 2003 to 2005, which were not clearly understood by the public then they appear to have decided to used FSD Kenya to do a more comprehensive analysis.
The report highlights a problem, which many bank customers face. They start a relationship with a bank for one reason, but without knowing all the charges for various others banks services. E.g. it shows that you may take a loan at one bank because of the low interest rates, but pay a lot more to service the loan, or you may open an account because of the low opening balance or free salary processing, but find it very expensive to do anything else.
Charges form an important part of bank income (the top 5 banks earnings based on commissions were Oriental, EABS, Baroda, Family Finance and Equity who all earned over 50% of their 2007 income from non-interest earnings). In terms of bank charges, Equity Bank has been very popular for two reasons
(i) They came on to the banking scenes four years ago without any legacy charges; while other banks used to adjust their charges, based on what other banks were charging, Equity were able to set their own charges
(ii) Many of their services (with low charges) are offered to customers and non-customers alike – like 50-shilling banker’s cheques.
I hope the report, and others from FSD Kenya will be republished in a daily newspaper for the millions of bank customers who don’t have Internet access to review (this is the case in Uganda)