Kenya’s largest banks in terms of assets and customer base, offer the most expensive loans.
A list of the banks that offer the most and least expensive loans.
This is according to a cost of credit report by the Kenya Bankers Association’s which on the other hand terms small lenders as those with the best-priced deals in offering loans.
The data shows that Barclays Bank of Kenya, Equity Group and NIC Bank top the list if lenders with the highest total cost of credit whereas Victoria Commercial Bank and Guaranty Trust Bank (GTB) offer the cheapest loans.
The ranking factors in the cost a borrower would incur to repay a Sh1 million unsecured loan over a period of 12 months.
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A Sh1 million one-year loan from Barclays Kenya, for instance will cost a borrower Sh135,245, including a Sh57,800 fee that is equivalent to 42 per cent of the total cost of credit.
Likewise, borrowing the same amount from Equity Bank would cost one Sh132,445 which includes fees of Sh55,000 whereas NIC charges Sh121,445 for a similar amount, including a non-interest fee of Sh44,000.
On the other hand, the same loan at Victoria Bank costs Sh77,445 with the reason being the lender charges no fees on the loans other than interest as set in the law. GTB follows closely with a total cost of credit of Sh77,555.
The cheap cost of credit by small banks is in a bid to see them win over clients from the big lenders who enjoy a huge market power that allows them to charge higher fees.
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The top banks charge even higher on short-term loans so as to increase the frequency of the fees that appear only once on long-term credit facilities.
For instance, Equity charges Sh5,000 for a one-month Sh100,000 loan; bringing the total cost of such credit to Sh6,667 (with 17.5 per cent being interest).
The data indicates how borrowers are more concerned with ease of getting credit than its cost, making lenders charge different rates based on their customers’ profile.
