{"id":493,"date":"2017-06-25T16:41:55","date_gmt":"2017-06-25T16:41:55","guid":{"rendered":"http:\/\/marvin.co.ke\/blog\/?p=493"},"modified":"2017-06-25T16:42:33","modified_gmt":"2017-06-25T16:42:33","slug":"effects-of-interest-rate-capping-in-kenyan-banking-sector","status":"publish","type":"post","link":"https:\/\/marvin.co.ke\/blog\/2017\/06\/25\/effects-of-interest-rate-capping-in-kenyan-banking-sector\/","title":{"rendered":"Effects of Interest Rate capping in Kenyan Banking Sector"},"content":{"rendered":"

Banking amendment act signed by the president in 2016 have regulated applicable rates to banks loans<\/a> and deposits thereby capping the interest that banks can charge on loans and deposits.This has led to the below underlined effects in the banking sector.The analysis is based on the report released by cytonn investments\u00a0<\/a><\/p>\n

1. Increased consolidation through M&A activities<\/strong>: The Kenya banking sector has witnessed increased consolidation through acquisition activities, with local banks such as Diamond Trust Bank acquiring Habib Bank, and I&M Holdings\u2019 acquisition of Giro Bank; while foreign banks namely M Bank\u2019s acquisition of Oriental Commercial Bank, and SBM Holdings, which is set to acquire Fidelity Commercial Bank.<\/p>\n

2. Staff lay-offs and closure of branches<\/strong>: With rising operating expenses in the sector, and the expected reduced margins owing to the enactment of the Banking (Amendment) Act 2015, banks resorted to laying off staff and closing branches, with close to 840 bank employees affected last year, and 21 branches closed.<\/p>\n

3. Adoption of technology<\/strong>: Kenya Bankers Association (KBA) launched its real-time interbank switch, PesaLink, and kicked off a phased rollout of the digital payments platform. PesaLink will let customers make payments between banks in real-time without the need for intermediaries. Additionally, the customers using PesaLink can initiate transactions from diverse channels including from mobiles, banks\u2019 branches, ATMs, agency banking outlets and through the internet.<\/p>\n

4. Decline in private sector credit growth<\/strong>: Private sector credit growth has been on a decline for 16 consecutive months, coming in at 4.3% in December 2016 from a high of 21.0% in August 2015. The decline is attributed to structural reforms in the banking sector and strict adherence to prudential guidelines in terms of loan book quality and sufficient provisioning. This prompted banks to prefer to lend to the government as it is risk free as opposed to the private sector, which is considered riskier.<\/p>\n

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.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Banking amendment act signed by the president in 2016 have regulated applicable rates to banks loans and deposits thereby capping the interest that banks can …<\/p>\n","protected":false},"author":2,"featured_media":494,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3],"tags":[],"yoast_head":"\nEffects of Interest Rate capping in Kenyan Banking Sector - Marvin's Blogpost<\/title>\n<meta name=\"description\" content=\"President Uhuru has signed into law a Bill capping bank interest rates at 4 per cent above the Central Bank Benchmark Rate, applicable rates to banks loans\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/marvin.co.ke\/blog\/2017\/06\/25\/effects-of-interest-rate-capping-in-kenyan-banking-sector\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Effects of Interest Rate capping in Kenyan Banking Sector - 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