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Nairobi Business Monthly
Home»Money»NOW TIME TO LEASH BANKS
Money

NOW TIME TO LEASH BANKS

EditorBy Editor11th July 2014Updated:23rd September 2019No Comments3 Mins Read
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The Nairobi Law Monthly September Edition

EDITORIAL

Now time to leash banks

It just defies logic.

Banks and lending institutions harvested a combined profit before tax of Sh124.57 billion last year. This was a 17 per cent growth from the previous year. By inference, every bank customer ideally contributed Sh6,200 to the offensive profits the banks made last year.

 

To a casual eye, these figures mean little. But for those who have defaulted on loans, this statistics are an eyesore. Indeed, how can these lenders rationlize the abnormal profits they gleeful make public every quarter? How can they defend the high cost of borrowing?

These profits are not just extraordinary. They are indecent.

They are obscene because they result from exploitation. They are made from overblown interest rates charged on loans. Indeed, as highlighted a report elsewhere in this publication, banks are robbing the majority poor to reward shareholders.

Kenya, it is now apparent, is the most fertile ground for all kind of money lenders that seek quick earnings.

It was in Kenya that a locally-based international bank made proportionally high profits than any of its branches in the entire world. The comparative profits declared by its Kenya outfit were so astonishing that its headquarters in Europe faded in comparison.

We may not agree with government in everything. Nevertheless, we definitely support recent remarks by Deputy President William Ruto: It’s time to rein in banks. Kenya must investigate why the local interest rates are about 15 per when it is only three per cent in India, five per cent in Nigeria and a paltry two per cent in the United States.

Granted, lenders will rush to justify their profits. They will hoodwink us with talk about high investment costs, not favourable banking terrain, stiff regulations by the Central Bank etc.

But we know it’s not any of this.  Even banks in US, South Africa and India operate within regulations set by respective authorities.

The problem with Kenya is that the money lenders operate without enough restraint. The available regulations only assist them to make billions of shillings in profits. The rules are unfair to the borrower.

Banks should not stifle economic growth; they must promote investment. They should improve the livelihoods of Kenyans who want to own homes and educate their young ones.

We must, as a country, harmonise the cost of lending and borrowing in the banking sector, to ensure that our interest rates not only reflect Kenyans’ ability to pay. They must reflect global financial realities.

 

The Nairobi Law Monthly September Edition
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