co-operative bank shenanighans

For me, banking halls evoke different emotions depending on the objective of my visit. If it is enquiries, such as loan and account balances then I am very calm. If the objective is anything to do with opening an account or taking a loan then I am very cautious….it feels like naingia kwa mtego wa panya therefore I can’t let my guard down. For now and for brevity purpose, I am only going to talk about co-operative bank and it’s awkward way of processing monthly repayments for those on a check-off loan plan. This is a cleverly designed system that probably won’t be classified as illegal but will set you back cash-wise, slow you down on repayment of the principal amount, and worst of all without your knowledge.

Let’s get into figures…let’s say you take a 1.5M loan (18% interest p. a) at the co-op or any bank for that matter monthly repayment will be an amount close to 33,000 (I haven’t calculated this). Of course it will hardly be such an absolute figure so for explanation purposes let it be Ksh 33,766 (interest + principal). When this money lands in the bank it goes through several accounts, I know of 3…the settlement account, your loan account and the salary account all of which have account numbers (there is also a suspense account that I know little about). When the employer deducts 33,766 (interest+ principal)…The money has to land in the settlement account before it goes to the loan account to settle both the interest due and the principal. However, the bank will receive 33,766 from the employer but will carry forward an amount close to 33,766 from the settlement account to the loan account. For instance they may carry forward 33,266 to your loan account (a difference of 500 bob). The remaining amount accumulates in your settlement account throughout the course of the loan duration.

Now that’s pocket change to some but let’s see how much this is for a guy repaying the loan in 72 months 500 x 72 = 36,000. You would expect that this money is refunded automatically at the end of the loan, right? Wrong. You have to claim it. That is if you know a settlement account existed in the first place. But how do you know this? Request for a loan statement and check whether the amount deducted from your payslip tallies with that on the loan statement. If not ask the person at the loans desk to explain further and request for a statement of the settlement account.

If the bank has an agreement with your employer then you have a grace period of about a month or two sometimes three (moratorium) before repayment begins. However the employer may start making deductions to your salary immediately and deductions during this period will land in the settlement account as it awaits the loan to start running (after the grace period). However co-op will not channel this money to reduce the principal amount instead it will lie in their account again waiting for you to claim. If you don’t, I don’t know what happens. take for instance if it was two months (33,766 X 2 = 67,532)

Sorry for the long post!:(:(:(:frowning: But this clearly is not in the spirit of clean business as highlighted by the central bank here.

@Leo Mwangih leta comments ama matusi hapa all are welcome.


Bankers are thieves. That’s how they post billions of profits every year. Kinda reminds me how my old man had to learn the hard way when he took an overdraft on his credit card.

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Very enlightening.

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Most educative

Thank you for the heads up…

mimi sijanyita any. if the amount to be deducted is 33,766 does it matter which accounts it lands in to. ok like a four year old settlement account ni nini? why isn’t the entire amount moved to the loan account? on what grounds do I claim money from the settlement account? wacha kwanza niseti fegi alafu ukiniexplainia niseti ndukulu juu kunaeza kua war na bank fulani


:smiley: :smiley: :smiley:

Fanya hivi. Enda uitishe loan statement yako and compare against deductions. If the amounts tally, well and good. If they don’t, raise hell.

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I will check on that. Thanks.

Oftenly we loose track of our loans. Sometimes back when our loans were re-valued the interest per month remained constant but the repayment period was increased. I was with stanchart. I don’t know why they did but they did that to many people but it was something about Central bank lending rates. I don’t know whether the measures taken by the new governor to reduce currency circulation will screw those already repaying coz if it does then I don’t know how we will survive.

wacha tungoje mambo niliona you were to be tracked and sued hehe

Very informative. Thanks

Wow! Thanks. Didnt know that.

@Mkufuu now you have made my sugar to rise. If the bank has been screwing me I will kill somebody.

Good info though i cant touch loans even with a seven foot pole.

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In Kenya you will rarely get a business that does its business in a straight forward manner. The more compicated the better so that they can find loopholes to dupe and rob the customer. From insurance companies with their funny policies on excess, the banks with their not so straight forward accounting entries (i have an accounting background but i found it hard to understand a loan statement), telcos with their ‘expiring bundles’ system, the monopolistic power distributor with its numerous funny variable rates for power etc etc. All these should be criminalised

Any one from co-op bank please come clarify this info…

And before they do this i need to educate people on how personal loan systems in Kenya work. Before i do that let me explain below terminologies

  1. Check-off system - This is a loan servicing system signed between banks and employers on behalf of employees on negotiated terms. In such systems employers remit monthly loan payments for their employees to be bank and the same deducted from their pay.
    2.Settlement account- In a check off system the money remitted by employer hits this account. This is an account with specific formulas that has been automatically fed with the customers loan schedule( This is in a document called total cost of credit).

In Kenya most of the tier 1 and 2 banks operate check off systems for personal loans. Thus for one to be check off system you only have two accounts, a loan account and a settlement which work hand in hand. The settlement account feeds the loan account with principal loan payments. Interest payments are credited into banks suspense accounts. The info that you are giving us that your money goes to four accounts is misleading as one does not require to even have a salary account with the bank to be in a check off system.

Specific preset formulas are normally set on settlement accounts to tally with your loan schedule thus no extra money remains from check off remittance unless your employer sends payments which are more than deduction schedules sent to them by the bank after disbursements

  1. Moratorium period - This in a grace period normally between 1 to 4 months before the first loan repayment after disbursement. If your employer was to start deducting from you before the period is over its your responsibility to claim the money from your banks as the money remains suspended in your settlement account.(Remember the settlement account is set in a way that it starts feeding your loan account only after the grace period).

As a customer in any organization, that’s including a bank it’s your responsibility and your entitlement to constantly check with them if your loan repayments are as agreed as some of these tier 1 banks have millions of customers that have loan accounts with them.

It’s also your right to demand explanations on where you see something wrong in your loan account. You can be compensated millions of shillings if you have a genuine complain on a commercial bank running irregular operations in your account. Please read consumer protection act 2013.

Much said it’s blatant irresponsible and unfair of you to generalize on a bank which advanced you large some of money to grow yourself (Remember they just don’t give everyone) unless you squandered the money thus into pains you to pay back.

In future if you fail to get satisfactory answers for your loan accounts please demand to talk to the management. It has always worked that way for me as i get to understand things from a neutral point of view.

Banking halls are always part of everyone one of us as our daily hassle is money, develop a positive attitude and you will meet positive attitude. If you go there with a negative attitude you will beget the same as these guys are normally under much pressure

Waah! @Leo Mwangih thanks for that much info, am more informed on how this loan thing goes. I always thought the repayment process was as simple as just deducting the payment made and reducing the balance

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Sample message a pal received from his banker, Family:

Dear Customer, due to the increase in KBRR, your applicable interest rate will increase after thirty days. More details on your loan will be provided.


“3. Moratorium period - This in a grace period normally between 1 to 4 months before the first loan repayment after disbursement. If your employer was to start deducting from you before the period is over its your responsibility to claim the money from your banks as the money remains suspended in your settlement account.(Remember the settlement account is set in a way that it starts feeding your loan account only after the grace period”…

Like stanchart is up to 20% now…Nicca was paying at a lower rate…This where you look for Golden Bells and start Singing…