small enterprises
Photo: Diana Ngila, Nation Media Group

Small enterprises in Kenya charged higher fees and interest rates by big banks

Banking tariffs charged on small enterprises in Kenya have gone up by five per cent over the past one year, a survey conducted by Think Business magazine shows.

Large banks are charging the small enterprises in Kenya more in ledger fees, counter withdrawals, standing orders, bankers cheques and transaction fees compared to medium and small banks.

According to Think Business chief executive officer Ochieng Oloo, borrowers have not been keen on comparing the various charges across different banks, leading to a lack of competition when banks are setting tariffs.

“From the survey, we see that banks are generally increasing their charges across the board, which explains the increase in non-interest income over the past three years. The large number of competitors in the industry is not benefitting customers from a cost perspective as would be expected,” said Mr Oloo.

The survey shows that the industry cost of banking per year for an SME with an annual turnover of less than Sh5 million has gone up to Sh55,584 by February 2016 from Sh52,712 in 2015.

For SMEs with a turnover of between Sh5 million and Sh500 million, the average cost of banking has gone up from Sh116,682 to Sh123,197 over the same period.

The survey uses an estimate of six cheque books, 48 counter withdrawals, 48 bankers cheques and 24 standing orders for the small SMEs per year, and double that number for the large SMEs.

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Other than the higher charge costs, small enterprises in Kenya have also been subjected to higher interest rates and collateral demands compared to large corporates when accessing credit from banks. This is because the lenders perceive them as carrying higher risk of default.

Incidentally, majority of small firms in Kenya rely on bank loans for capital financing, putting their growth expansion at the mercy of lenders and fluctuating interest rates.

Business Daily