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Law Capping interest rates
Rank: Elder Joined: 7/23/2008 Posts: 3,017
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Emerger wrote:Obi 1 Kanobi wrote:Emerger wrote:Impunity wrote:Mike Ock wrote:Impunity wrote:The Banking cartles and CBK have ganged up against the biol, very sad day.
Where in the world do commercial banks makes 30 billion profits and pay 1.5% pa interest on deposits?
Its only invetsment banks which can make such weird profits since most of them are actually pyranid schemes and cons...they quicly derate a country from AA+ to say C in a midnight then go behind door and buy the falling goverment papers in that same country, then after a year or two, they would elevate the country from C to A+, sell the papers and go home laughing.
For commercial banks like KCB and Equity, this is not their core buisness, so how how they manage those billion-profits is a mystery.
Unfortunately that is a defining characteristic of 3rd world countries: government is held hostage by private business interests Its becomes more messy when the Nations CEO is one of the biggest banker on the land! The Arab spring could be the only solution left, sadly. This bill may not see the light of the day. In my humble opinion i dont support the signing. We are in a liberal market aka free economy, why then revert the gains brought about by this position of freeness. Lowering of interest rates by banks et al cannot be emphasized more but putting a bill to do it is not the right avenue. The CBK is already putting measures in place to ensure the CBR & KBRR rates are effectively transmitted and they have already started to do so. This is the process that needs to be enforced and strengthened. One would wonder, how was the +4% for loans & 70% for deposits arrived at? What were the factors considered? What stakeholders input were put in place? Its we the consumers of credit who needs to 'force' the reduction of lending rates via the pricing information available in the various sources. my thoughts. Free market economics include macroeconomic interventions by govt through measures that include legislation otherwise anyone would start a bank etc. besides, whats the difference between capping the rates and the already existing banking regulations that determine minimum capital, liquidity ratios, concentration ratios etc. they are all regulations of one sought or another. In other industries, fuel prices have been capped, and I am yet to see any energy company folding up and quitting Kenya. All we are asking for is that the president passes one law that protects the consumer of banking services instead of the bank owners. The recent Japan report on sustainable growth in this country should be telling on the need for a paradigm shift on how we as a country interpret capitalism. It shouldn't be a free for all Well put Sir. We only differ in the how not on the what. The what is agreeable and welcomed by all. However, the how is the issue here. You do not put a law to be enforced and at the same time have a regulator put regulations to regulate. The law should be to empower the regulator. The ratios among others are regulatory checks to ensure the free economy is effective and not open to abuse. Putting caps on interest rates beats one of the key mission/objective of the regulator being formulation & implementation of the monetory policies. Its the effectiveness on transmission of the monetary policies that needs a review not a bill to shortchange the part role of the MPC. A law should protect all not part. The japan opinion in my view is more of a fiscal aspect rather than a monetary aspect but needless to say an effective economy policy relies on both. This law does not affect the powers of the regulator in any way, it simply checks the greed of the banks by limiting the extent to which they can transfer their inefficiencies to consumers. The regulator can still influence the interest rate by changing the MPC, KBRR rates and formulating monetary policies as he deems fit. Who is not protected by such a law anyway. If banking within controls is not profitable, one can try their hands at subsistence farming! "The purpose of bureaucracy is to compensate for incompetence and lack of discipline." James Collins
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Rank: Elder Joined: 7/22/2009 Posts: 7,455
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Sample this: MP One
MP TwoMP ThreeMP FourBonus....Mind you, the above is just a SAMPLE!!! Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Elder Joined: 7/23/2008 Posts: 3,017
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MaichBlack wrote:President Uhuru is not going to sign that bill!!!
Any finance/economics guy will tell it would be a tragedy to individual loan seekers and SMEs.
Interest rates among other things depend on the risk profile of the client. If the rate is capped, the banks would focus on the least risky customers first - the government and blue chip companies. SMEs and individuals would follow if there is money left.
And why would I want to lend to 10,000 entities Kshs. 100,000/= each while there is a single entity (with a better risk profile) that is willing to take the entire billion??? The banks are already doing what you wrote up there. This bill has no effect on the risk profile of the market whatsoever, it will not change the bans risk profiling process. The idea is to make loans cheaper and interest rates more predictable. Banks currently first lend to Govt, then low risk corporates (good luck finding one in Kenya) then HNWI, then Salaried indivs, the small SME's and businessmen are at the bottom of the pile and that will not change "The purpose of bureaucracy is to compensate for incompetence and lack of discipline." James Collins
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Rank: Elder Joined: 7/23/2008 Posts: 3,017
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I could argue that this are wreckless lending practices by these institutions which failed to carry out proper KYC and other due diligence processes "The purpose of bureaucracy is to compensate for incompetence and lack of discipline." James Collins
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Rank: Elder Joined: 7/22/2009 Posts: 7,455
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Obi 1 Kanobi wrote:MaichBlack wrote:President Uhuru is not going to sign that bill!!!
Any finance/economics guy will tell it would be a tragedy to individual loan seekers and SMEs.
Interest rates among other things depend on the risk profile of the client. If the rate is capped, the banks would focus on the least risky customers first - the government and blue chip companies. SMEs and individuals would follow if there is money left.
And why would I want to lend to 10,000 entities Kshs. 100,000/= each while there is a single entity (with a better risk profile) that is willing to take the entire billion??? The banks are already doing what you wrote up there. This bill has no effect on the risk profile of the market whatsoever, it will not change the bans risk profiling process. The idea is to make loans cheaper and interest rates more predictable. Banks currently first lend to Govt, then low risk corporates (good luck finding one in Kenya) then HNWI, then Salaried indivs, the small SME's and businessmen are at the bottom of the pile and that will not change The thing is, given their risk profile, most Kenyans fall way out of the 4% margin given. So these fellows can kiss ever getting a loan from a Bank EVER!!! At the moment, they get the loans but at a higher rate. If entrepreneurs, individuals, SMEs etc. have a problem getting loans even when the banks can charge them a higher interest rate, imagine how bleak the situation will be if this bill is signed! And guess what!!! MPs have a lower risk profile (5 years) given the stability of their "jobs" and high salaries. So they will not suffer with rest. Actually the gain. And you pay (the price!)!!! Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Member Joined: 2/9/2012 Posts: 576
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The govt is the biggest borrower from commercial banks.Why cant they start by reducing that as Kibaki did,then the rates will be on a free fall If you factor a 4% max on CBR rate what of default? Africa belongs to Africans.
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Rank: Elder Joined: 7/23/2008 Posts: 3,017
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MaichBlack wrote:Obi 1 Kanobi wrote:MaichBlack wrote:President Uhuru is not going to sign that bill!!!
Any finance/economics guy will tell it would be a tragedy to individual loan seekers and SMEs.
Interest rates among other things depend on the risk profile of the client. If the rate is capped, the banks would focus on the least risky customers first - the government and blue chip companies. SMEs and individuals would follow if there is money left.
And why would I want to lend to 10,000 entities Kshs. 100,000/= each while there is a single entity (with a better risk profile) that is willing to take the entire billion??? The banks are already doing what you wrote up there. This bill has no effect on the risk profile of the market whatsoever, it will not change the bans risk profiling process. The idea is to make loans cheaper and interest rates more predictable. Banks currently first lend to Govt, then low risk corporates (good luck finding one in Kenya) then HNWI, then Salaried indivs, the small SME's and businessmen are at the bottom of the pile and that will not change T he thing is, given their risk profile, most Kenyans fall way out of the 4% margin given. So these fellows can kiss ever getting a loan from a Bank EVER!!! At the moment, they get the loans but at a higher rate. If entrepreneurs, individuals, SMEs etc. have a problem getting loans even when the banks can charge them a higher interest rate, imagine how bleak the situation will be if this bill is signed! And guess what!!! MPs have a lower risk profile (5 years) given the stability of their "jobs" and high salaries. So they will not suffer with rest. Actually the gain. And you pay (the price!)!!! Using risk profiling is the ideal, the problem is banks don't even use risk profiling in determining who or when to lend money. They simply and carelessly just ask for collateral (read land). If the banks did their risk profiling properly, they would realise that the people they have left out are the least risky. Most of these people left out are comfortably borrowing and servicing Sacco loans. This are the teachers, govt employees, cops etc. Lending Sh 1,000 to 100 people is more profitable and safer than lending Sh 100,000 to 1 person. "The purpose of bureaucracy is to compensate for incompetence and lack of discipline." James Collins
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Rank: Elder Joined: 7/22/2009 Posts: 7,455
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Obi 1 Kanobi wrote:
Lending Sh 1,000 to 100 people is more profitable and safer than lending Sh 100,000 to 1 person.
Cheaper/more profitable??? Processing, Profiling, Validating and due diligence on collateral etc. × 100 is cheaper??? Then chasing after some of the 1000 fellows who have not paid, Paying 1000 lawyers to follow 1000 defaulters (or even just 300 of them), 1000 (or say 300) court cases???? Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Elder Joined: 12/25/2014 Posts: 2,300 Location: kenya
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MaichBlack I can't fail to notice that the mpigs float this bill one year before elections . Sample this: ECONOMY-KENYA: Bill To Tame Interest Rates Seen As A Blow To Free Market By IPS Correspondents • NAIROBI, (IPS) • November 30, 2000(this was almost one year before elections)ShareTweet+ 1Mail Economists have described the recently passed Bill, which seeks to reduce high interest rates, as a major blow to the free market banking sector in the East African country. The Bill, introduced in parliament by opposition legislator Joe Donde, seeks to peg interest rates on the Treasury Bill, reducing the cost of borrowing from the current 30 percent to 15 percent. The Bill also insists that the maximum interest charged must not exceed the original loan borrowed. I can google all the time stamps but this is just a sample. This guys are just doing it for selfish gains.i hope the Kenya's CEO to stay put and change nothing .we all have to shaved by the same blade.
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Rank: Elder Joined: 7/23/2008 Posts: 3,017
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MaichBlack wrote:Obi 1 Kanobi wrote:
Lending Sh 1,000 to 100 people is more profitable and safer than lending Sh 100,000 to 1 person.
Cheaper??? Processing, Profiling, Validating and due diligence on collateral etc. × 100 is cheaper??? Then chasing after some of the 1000 fellows who have not paid, Paying 1000 lawyers to follow 1000 defaulters (or even just 300 of them), 1000 (or say 300) court cases???? Banking is like insurance, what you want is to spread your risk around. The biggest risk for banks is concentration risk. Secondly banks that grow sustainably are those that move their incomes from funded (interest income) to none funded (fees & commissions) income. You achieve this by selling small loans to more people hence earning more processing fees etc. By the way all those those processes you listed up there are charged by the bank and are not given free of charge, so the more income for you. Using your example, should your single customer default, you would have to shut down your bank  "The purpose of bureaucracy is to compensate for incompetence and lack of discipline." James Collins
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Rank: Elder Joined: 12/25/2014 Posts: 2,300 Location: kenya
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MaichBlack wrote:Obi 1 Kanobi wrote:
Lending Sh 1,000 to 100 people is more profitable and safer than lending Sh 100,000 to 1 person.
Cheaper??? Processing, Profiling, Validating and due diligence on collateral etc. × 100 is cheaper??? Then chasing after some of the 1000 fellows who have not paid, Paying 1000 lawyers to follow 1000 defaulters (or even just 300 of them), 1000 (or say 300) court ocases???? Would love Othello to weigh in on this.im sure he will share the same sentiments as you MaichBlack
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Rank: Member Joined: 2/24/2015 Posts: 154 Location: Nairobi
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The Financial Times' East Africa correspondent tweeted today that Manoah Esipisu (the official State House spokesman) told the paper, regarding the bill: "We believe in a free market and free market dynamics should generally apply." Seems pretty clear that the President won't sign.
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Rank: Elder Joined: 6/23/2009 Posts: 13,515 Location: nairobi
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Obi 1 Kanobi wrote:MaichBlack wrote:Obi 1 Kanobi wrote:
Lending Sh 1,000 to 100 people is more profitable and safer than lending Sh 100,000 to 1 person.
Cheaper??? Processing, Profiling, Validating and due diligence on collateral etc. × 100 is cheaper??? Then chasing after some of the 1000 fellows who have not paid, Paying 1000 lawyers to follow 1000 defaulters (or even just 300 of them), 1000 (or say 300) court cases???? Banking is like insurance, what you want is to spread your risk around. The biggest risk for banks is concentration risk. Secondly banks that grow sustainably are those that move their incomes from funded (interest income) to none funded (fees & commissions) income. You achieve this by selling small loans to more people hence earning more processing fees etc. By the way all those those processes you listed up there are charged by the bank and are not given free of charge, so the more income for you. Using your example, should your single customer default, you would have to shut down your bank Kanobi surely. Negotiation fee of 2.5% for instance will be exactly KES 2,500 on the two scenarios. It's cheaper to have less borrower customers but quality. SCBK are living proof
HF 90,000 ABP 3.83; KQ 414,100 ABP 7.92; MTN 23,800 ABP 6.45
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Rank: Elder Joined: 7/22/2009 Posts: 7,455
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@Obi - Would you rather loan at total of Kshs. X to 100,000 Kenyans or loan the whole Kshs. X to Safaricom??? Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Member Joined: 7/3/2014 Posts: 245
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Can someone post the link to the bill here ? In the world of securities, courage and patience become the supreme virtues after adequate knowledge and a tested judgment are at hand.
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Rank: Elder Joined: 12/25/2014 Posts: 2,300 Location: kenya
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researchfirst wrote:The Financial Times' East Africa correspondent tweeted today that Manoah Esipisu (the official State House spokesman) told the paper, regarding the bill: "We believe in a free market and free market dynamics should generally apply." Seems pretty clear that the President won't sign. There you go. You can't shoot your own foot .let them come out of parliament and we dance the same koffi Olomide music ,hakuna mapendeleo
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Rank: Elder Joined: 6/23/2009 Posts: 13,515 Location: nairobi
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enyands wrote:researchfirst wrote:The Financial Times' East Africa correspondent tweeted today that Manoah Esipisu (the official State House spokesman) told the paper, regarding the bill: "We believe in a free market and free market dynamics should generally apply." Seems pretty clear that the President won't sign. There you go. You can't shoot your own foot . Manaoh will not guide us on this one.. Kenyans are tired
HF 90,000 ABP 3.83; KQ 414,100 ABP 7.92; MTN 23,800 ABP 6.45
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Rank: Elder Joined: 12/25/2014 Posts: 2,300 Location: kenya
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obiero wrote:enyands wrote:researchfirst wrote:The Financial Times' East Africa correspondent tweeted today that Manoah Esipisu (the official State House spokesman) told the paper, regarding the bill: "We believe in a free market and free market dynamics should generally apply." Seems pretty clear that the President won't sign. There you go. You can't shoot your own foot . Manaoh will not guide us on this one.. Kenyans are tired Tired of mpigs ama banks clarify
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Rank: Elder Joined: 7/22/2009 Posts: 7,455
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MaichBlack wrote:President Uhuru is not going to sign that bill!!!
Any finance/economics guy will tell it would be a tragedy to individual loan seekers and SMEs.
Interest rates among other things depend on the risk profile of the client. If the rate is capped, the banks would focus on the least risky customers first - the government and blue chip companies. SMEs and individuals would follow if there is money left.
And why would I want to lend to 10,000 entities Kshs. 100,000/= each while there is a single entity (with a better risk profile) that is willing to take the entire billion??? Link: Exactly as I had said earlier. This is Finance/Economics 101. Pure common sense!!!Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Elder Joined: 7/22/2009 Posts: 7,455
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