Stanbic Bank Goes for the Tiered Interest Rate Model After Cap Removal

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After the repeal of interest capping law by President Uhuru Kenyatta on 9th November this year, commercial banks were reluctant to immediately start charging borrowers high interest for loans. Today, however, Stanbic Bank welcomed the repeal of the interest rate cap.

In its new development, the bank will start offering renewed packages particularly for SME financing and come up with risk-based pricing that will offer different interest rates and loan terms to different consumers, based on their creditworthiness as guided in the Banking Sector Charter published by Central Bank of Kenya in 2019.

For all existing loan contracts before the repeal, they will be upheld under the same terms and conditions and will not change for the duration of the loan period, reiterating the banks’ commitment towards running a well-functioning financial system that contributes to the development of society.

As for the decision to welcome the uncapped interest, the lender holds that in the wider interest of the economy to have a low cost of credit, there is a need to focus more on the drivers and the underlying causes of the high cost of credit as a complementary approach to fix the price of credit by legislation.

While the bank may be cautious not to scare away existing customers and still attract new borrowers, sooner or later, both the risky and borrowers will be caught up in the differentiated interest rates, that commercial banks are quickly adopting.

 

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