Co-op Bank to retain interest rates on outstanding loans
Sunday, November 10th, 2019 19:41 | 3 mins read
Co-operative Bank has assured its customers that it will retain interest rates on outstanding loans even after the repeal of the rate cap and subsequent assent of the bill into law.
“We are pleased to advice all our customers that Co-op Bank is meanwhile retaining existing interest rates for all our outstanding loans based on existing money market conditions,” said Co-op Bank Group Managing Director and chief executive Gideon Muriuki in a statement.
The move follows an earlier notification by some lenders that they will make changes on interest rates in a bid to effect the changes according to the law.
On November 8, Sidian Bank issued a circular to employees saying: “Following the signing of the Finance Bill into law by the President, the bank has reviewed interest rates for various products based on the associated credit risk. The pricing of the existing loans will be communicated in due course,” Sidian Bank chief executive Chege Thumbi said in a circular.
According to the memo, corporate loans would attract an interest of 16 per cent, small and medium enterprises (17 per cent), consumer (19 per cent), micro and unsecured loans (19 per cent), credit (19 per cent) and mobile (19 per cent).
However, in an advert in a section of the media, Sidian Bank Board Chairman James Mworia dismissed the memo saying: “The Board of Directors and management of Sidian Bank Ltd regret the unfortunate issuance of a statement that it had reviewed and increased interest rate following the repeal of Section 33B of the Banking Act.”
Moses Kuria threat
This comes as Gatundu MP Moses Kuria, revealed that Parliament will form a select committee to audit Kenya’s economic management as well as interest rates by banks and other financial institutions.
According to Kuria, if banks “continue to misbehave”, he will reintroduce the capping of interests after six months in line with parliamentary standing orders.
“If the banks...misbehave and go above the four per cent above the CBK rate, I will reintroduce this amendment. The interest rates must remain at three to four per cent,” Kuria was reported to have told one of the dailies.
Earlier on, Co-op Bank and CFAO Kenya Ltd had signed a deal that enables farmers and cooperative societies to easily acquire farm machinery and the equipment they need.
According to Vincent Marangu, Co-op Bank Director of Co-operatives Banking, through the deal, farmers and co-operative societies can pay 20 per cent of the cost and get 80 per cent financing for them to acquire new machinery and equipment that they need.
Besides, Marangu said the scheme will give farmers the option of seasonal loan payments to match with the seasonal nature of some agricultural crop cycles and that farmers can extend loan repayment period of up to 60 months.
However, those customers who prefer to take shorter-term loans, the scheme will offer a loan repayable in 12 months, whereby a whole 50 per cent of the loan will not attract any interest charges.
As an added benefit, customers will receive 250 kilogrammes of Baraka fertilizer with the purchase of every tractor under this scheme.
The deal was signed by Marangu and CFAO Kenya Managing Director Toyoki Kuno on behalf of their respective organisations at CFAO Kenya offices in Nairobi.
Speaking during the launch of the partnership, Marangu said Co-operative Bank is always looking for ways to assist customers succeed in their projects and businesses.
Mr Kuno said the company is committed to supporting the Big Four Agenda, especially food security by providing comprehensive farming solutions.
“We will provide continuous operator training and excellent after sales support. We feel honoured to partner with a bank like the Co-operative Bank that will give access to societies and farmers looking to re-tool, mechanize and upgrade farms through this partnership,” he said.
Agriculture is a key economic driver in Kenya and a key pillar in the pursuit of sustainable food security.