The Kenya commercial Bank suffered a major set back in Kiambu County after the numbers of borrowers seeking loans in local branches drastically dropped by half due high interest rates offered for such services.
According to Rachael Wanderi, Credit Administration Officer at the branch said the high interest rates had put off many customers and reduced the number of applicants by at least 50% compared to when the rates were within the reach of the residents.
She told KNA that the interest rates have risen from 16%-20% to 21%-22% which has reduced the number of people taking up loans.
Ms. Wanderi decried that before the changes, she initially processed upto 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 300,000 shillings 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 but that it has instead resulted to major losses to the bank. “Initially, we had low interest rates that had many borrow money, 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.
“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 a title deeds for collateral to secure a loan in the bank as they are not yet materially established.” she said.
Lydia Shiroya and Maureen Gathogo