The Banking (Amendment) Act, 2016, enforced last September, capped interest rates on loan at four percentage points above the 10 per cent Central Bank Rate. The law also requires the banks to pay a minimum of 70 per cent of CBR on term deposits.This means all Kenya banks are forced to offer loans at a maximum of 14%.

Costs that a borrower may be charged in addition to the interest rate include: commitment / facility fees, processing fees, early repayment fees, negotiation fees, valuation fee, insurance, appraisal fee, legal fee.This costs are reflected in the Annual Percentage Rate as discussed in our previous article cost of credit , which captures the total cost of credit.

The lenders adopted the APR framework from July 2014 to help customers accurately compare interest rates in different banks to make informed decisions. We did an analysis on non-interest rate charges by different banks based on the readily available data from  cost of credit website.

From the analysis it is interesting to note how the other fees charged by a bank can significantly change the total cost of a loan for a consumer.The data was derived from banks offering Personal unsecured loan up to 5 years and the principal loan amount is KES 100,000.00 at a cap interest rate of 14%.The listed banks are currently registered with  cost of credit website.

The information  is dated 25th June 2017.

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Disclaimer: The views expressed in this publication, are those of the writers where particulars are not warranted- as the facts may change from time to time. This publication is meant for general information only, and is not a warranty, representation or solicitation for any product that may be on offer. Readers are thereby advised in all circumstances, to seek the advice of an independent financial advisor to advise them of the suitability of any financial product for their investment purposes.