Banks feeling the heat after interest rates capping

[x-trail]

Which banks are giving the best fd rates now

[Mkufuu]

@Simiyu22

I asked the same questions a couple of weeks ago. Interest rate capping was not carefully thought through. What was it meant to achieve? Really, a government is supposed to discourage people from borrowing. And, if otherwise has it made it easier to borrow? Theoretically, capping makes it infinitely harder for banks to lend, especially to people with a checkered borrowing history. Sometimes, mama mboga really needs to borrow but her history is not good. Her income is up and down. Before, the banks were flexible. Albeit a high rate, but at least you could borrow. Such small business owners are a good reason not to cap the rates. It gives the banks flexibility. But our legislators combined IQ cannot sum up to the number of seats they occupy.
The president should have sat down with he banks on a round table, and asked them, what impact would capping the rates have. Then he would ask them alternatives. The banks are the best resource for such issues. Then, if nothing tangible comes out, have them sit with legislators. Not sling it out on the news. A better solution would have been found. Now its loan sharks galore.

Which channel through which mama mboga used to borrow loans has been closed? What has changed? I can accept a knee jerk reaction from a bank but not from a layman.

[system]

@Mkufuu

Which channel through which mama mboga used to borrow loans has been closed? What has changed? I can accept a knee jerk reaction from a bank but not from a layman.

What he is saying is that credit has dried up.

[Mkufuu]

@Okiya

What he is saying is that credit has dried up.

Kwani credit offered through mshwari and other similar channels is no longer available? Because that’s mama mboga’s channel.

[system]

@Mkufuu

Kwani credit offered through mshwari and other similar channels is no longer available? Because that’s mama mboga’s channel.

Credit has dried up!!! Mama mboga had access to banks which charged her 23%p.a. Now she’s left with only mshwari at 96% p.a which has limits on amounts she can borrow.

[Mkufuu]

@Okiya

Credit has dried up!!! Mama mboga had access to banks which charged her 23%p.a. Now she’s left with only mshwari at 96% p.a which has limits on amounts she can borrow.

Those were loans given to people with security and with small businesses and not mama mbogas… That rate was even given to employees in contract jobs and people on permanent terms with less known employers. Credit for these has dried up but that’s temporary Lakini mama mboga who had no security wasn’t among them. Ama what do you define as mama mboga? I remember getting a loan at equity at 25% when I was on contract and it was a 100k that was to be paid in a year. Ama mimi pia ni mama mboga?

[Simiyu22]

@Mkufuu

Which channel through which mama mboga used to borrow loans has been closed? What has changed? I can accept a knee jerk reaction from a bank but not from a layman.

Mama mboga was just a cliche that I used. There are a lot of small business people operating daily in Kenya. If you have ever run a business, because of incomes being unsteady, many times you may need a bridge to substain you until u got comfy. In the old system, at least you could borrow even at that 23%. It greatly helps I will tell you that. Now?? The beginning of this thread is banks forecasting reduction of personel.

[Simiyu22]

@Mkufuu

Those were loans given to people with security and with small businesses and not mama mbogas… That rate was even given to employees in contract jobs and people on permanent terms with less known employers. Credit for these has dried up but that’s temporary Lakini mama mboga who had no security wasn’t among them. Ama what do you define as mama mboga? I remember getting a loan at equity at 25% when I was on contract and it was a 100k that was to be paid in a year. Ama mimi pia ni mama mboga?

Dont dharau mama mboga. They are an important part of this economy. So make more money than me and U. I used mama mboga as a cliche for small business owners. A little bit of creative thinking helps.

[Mkufuu]

@Simiyu22

Mama mboga was just a cliche that I used. There are a lot of small business people operating daily in Kenya. If you have ever run a business, because of incomes being unsteady, many times you may need a bridge to substain you until u got comfy. In the old system, at least you could borrow even at that 23%. It greatly helps I will tell you that. Now?? The begin of this thread is banks forecasting reduction of personel.

Reduction of personnel is an awesome thing to do. Why wouldn’t you want banks to run on a leaner system if it means providing cheaper loans? Banks will need to rely on credit ratings in order to give loans to business people at low rates… Unfortunately CRBs aren’t reliable atm so they’ll have to figure out how to do it or strengthen CRBs because it’s they who destroyed the system in the first place because they didn’t need it.

[Mkufuu]

@Simiyu22

Dont dharau mama mboga. They are an important part of this economy. So make more money than me and U. I used mama mboga as a cliche for small business owners. A little bit of creative thinking helps.

Don’t you think equating SMEs to mama mboga’s is a bit rich considering these are employers?

[system]

@Mkufuu

Those were loans given to people with security and with small businesses and not mama mbogas… That rate was even given to employees in contract jobs and people on permanent terms with less known employers. Credit for these has dried up but that’s temporary Lakini mama mboga who had no security wasn’t among them. Ama what do you define as mama mboga? I remember getting a loan at equity at 25% when I was on contract and it was for a 100k loan that was to be paid in a year. Ama mimi pia ni mama mboga?

Good you have now agreed credit has dried up. As to whether its permanent or temporary, time will tell. Mama mboga are those small scale traders whose loan security was chattels

[Mkufuu]

@Okiya

Good you have now agreed credit has dried up. As to whether its permanent or temporary, time will tell. Mama mboga are those small scale traders whose loan security was chattels

Okiya this is what I have always stated banks will need to reduce NPLs… How do they do that? By refusing to lend those that are likely to default. But atm they don’t know who that is because they misused CRBs…currently they are employing a blanket criteria, which will change in the near future.

[system]

@Mkufuu

Okiya this is what I have always stated banks will need to reduce NPLs… How do they do that? By refusing to lend those that are likely to default. But atm they don’t know who that is because they misused CRBs…currently they are employing a blanket criteria, which will change in the near future.

Banks have credit committees that assess the borrower’s likelihood of default. You cannot blame CRB for the current situation where banks are applying a blanket ban on disbursement of loans. Check what @jimmy_m friends are going through with their banks. They seem to have good credit history and their loans are more likely to be performing yet they are denied credit. Don’t blame CRB.

[Mkufuu]

@Okiya

Banks have credit committees that assess the borrower’s likelihood of default. You cannot blame CRB for the current situation where banks are applying a blanket ban on disbursement of loans. Check what @jimmy_m friends are going through with their banks. They seem to have good credit history and their loans are more likely to be performing yet they are denied credit. Don’t blame CRB.

Okiya I will ask you a few questions

1. How does Bank A know you have a loan at Bank B and Sacco C?
2. How does Bank A know you never defaulted on your loan at Bank B and Sacco C.
3. How does Bank A know that the default you are listed for at Bank B was not an erroneous one. And you had paid your premiums on time.

Look banks have blacklisted people erroneously at CRBs and a lots of info on CRBs is erroneous. Most saccos have not been using CRBs data or listing defaulting clients. Banks have advanced loans to people only to find out that the reason they have been defaulting is because they have a facility with another lender that was unknown at the time. Banks even don’t bother informing people that they have listed them on CRBs but will send you five texts everyday asking you to apply for loans and use their online services and what not.

[system]

@Mkufuu

Okiya I will ask you a few questions

1. How does Bank A know you have a loan at Bank B and Sacco C?
2. How does Bank A know you never defaulted on your loan at Bank B and Sacco C.
3. How does Bank A know that the default you are listed for at Bank B was not an erroneous one. And you had paid your premiums on time…

They use CRB. But CRB is not an end by itself in assessing creditworthiness. Banks are simply refusing to lend.

[system]

@Mkufuu

Okiya I will ask you a few questions

1. How does Bank A know you have a loan at Bank B and Sacco C?
2. How does Bank A know you never defaulted on your loan at Bank B and Sacco C.
3. How does Bank A know that the default you are listed for at Bank B was not an erroneous one. And you had paid your premiums on time.

Look banks have blacklisted people erroneously at CRBs and a lots of info on CRBs is erroneous. Most saccos have not been using CRBs data or listing defaulting clients. Banks have advanced loans to people only to find out that the reason they have been defaulting is because they have a facility with another lender that was unknown at the time. Banks even don’t bother informing people that they have listed them on CRBs but will send you five texts everyday asking you to apply for loans and use their online services and what not.

i believe the statement in bold to be inaccurate, the first thing banks do before even entering your loan application into the system for consideration is to check your standard credit report and personal profile from the CRB, if your PPI is not good the loan application wont even go into the system.
You would be amazed how much information they have on your ranging from dormant, to performing accounts including any delays (actually in number of days) you have ever taken to service a facility

If you doubt this, call metropol and request for yours and you can confirm the same

Then even with a PPI of M1 and metro score thats in the 900 range, they still turn you down. (like the case of my friends )

on the part of them sending you texts to apply, those are just the sales people doing their Job, immediately you fill the application, it must go through above process before its even send to the risk assessment team (and these guys are from the devil himself )

[Mkufuu]

@Okiya

They use CRB. But CRB is not an end by itself in assessing creditworthiness. Banks are simply refusing to lend.

For what reason? My guess is they are playing safe for now. All they can do is reduce expenditure and npls while they watch out for market behavior. CBK reported that there are banks seeking licenses and new products from existing awaiting approval. That’s a good thing IMHO

[Mkufuu]

@jimmy_m

i believe the statement in bold to be inaccurate, the first thing banks do before even entering your loan application into the system for consideration is to check your standard credit report and personal profile from the CRB, if your PPI is not good the loan application wont even go into the system.
You would be amazed how much information they have on your ranging from dormant, to performing accounts including any delays (actually in number of days) you have ever taken to service a facility

If you doubt this, call metropol and request for yours and you can confirm the same

Then even with a PPI of M1 and metro score thats in the 900 range, they still turn you down. (like the case of my friends )

on the part of them sending you texts to apply, those are just the sales people doing their Job, immediately you fill the application, it must go through above process before its even send to the risk assessment team (and these guys are from the devil himself )

I have gone through this system myself and actually did a thread about it. Fortunately it attracted some banker with whom we squared it out on that thread. In 2014 some saccos like mine weren’t listing people on CRB. I am not sure if that has changed. I mean you could have a 1M loan and no one knows about it except the sacco and your guarantors.

[system]

@Mkufuu

For what reason? My guess is they are playing safe for now. All they can do is reduce expenditure and npls while they watch out for market behavior. CBK reported that there are banks seeking licenses and new products from existing awaiting approval. That’s a good thing IMHO

I don’t know why they are refusing to lend. But why deny someone with good credit worthiness a facility in the name of reducing NPLs? In fact a customer who was credit worthy when rates were 24% now has more ability to repay since rates are 14%.

Whether they are playing it safe, my conclusion is that quite a number of people who were accessing loans at 24% previously may not be able to access credit in the near future.

[Mkufuu]

I was listed for defaulting payment of a 100k loan that I had cleared eons ago…the treatment I received from customer service at two banks was appalling at best. At one point I had to school one agent how to use the CRB. I am actually glad they’re firing most of them, that should have happened yesterday.