Borrowers of loans from Kenya Commercial Bank (KCB) in Kiambu County have drastically reduced by 50 per cent because of the high interest rates being charged by the institution
The High interest rates have currently put off many customers in Kiambu as they find it difficult to borrow money from banking institutions.
According to Rachael Wanderi, the Credit Administration Officer at KCB Kiambu Branch, interest rates have risen from 16%-20% to 21%-22% which has reduced the number of people taking up loans.
Ms. Wanderi told KNA she initially processed up to 50 loans in a day where customers borrowed an estimate of Sh. 4 million and is now left to process one loan or none. She also says that, the amount being borrowed has decreased and ranges below Sh. 300,000 which was too low as opposed to yester years when borrowers sought millions.
The officer attributed the decrease to the stringent measures that were put in place to restrict people from borrowing loans due to lack of inflow and there was no money to give customers.
Ms. Wanderi complained that, as much as the interest rates have become high and regulations made tighter, it has not helped at all rather it has resulted to major losses to the bank. “Initially, we had low interest rates that attracted many borrowers, after the bank realized the increase of clients, it put in place regulations to control them,” she added.
According to her, few customers have since been borrowing money which has also posed a risk to the economy, as there is no circulation of money which is not healthy for the nation.
“Customers are not taking loans as they used to and this has affected their businesses tremendously. They are also not in a position to take top-ups to boost their businesses as they have not paid their previous loans yet,” she said.
Apart from that, she commented that mobile loan applications have also contributed to the low turnout of loan applicants in the banks. As much as customers occasionally borrow long-term loans, they have shifted to mobile applications to acquire short-term loans. This instant loans, she said were not doing any good to the banking institutions as they were operating at a loss.
“Few years back we used to offer both long-term and short-term loans, but due to the rise of mobile applications, customers have shifted to mobile applications, as they say, it is much easier, convenient and faster,” she said.
Ms. Wanderi added that, following the rise of the rates, young newly employed people have also suffered when they intended to access loans, following the restrictions put in place by the bank.
“Most young people cannot produce title deeds for collateral to secure a loan in the bank as they are not yet materially established,” she said.
By Maureen Gathogo/Lydia Shiloya