Tag Archives: Banking in Kenya

The crazy world of finance in Kenya

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Kenya’s Business Daily reports:

Florence, a publishing executive, has also received an email from Standard Chartered Bank informing her of changes in her interest rates from 17.5 per cent to 27 per cent effective November 19.

….. Last week, a Nairobi-based Chinese developer had his overdraft facility of $10 million reduced by half, and his $30 million loan negotiations on a new project put on hold after the bank informed him of its intention to use a new interest rate of 28 per cent instead of the earlier 19 per cent for the housing project.

28% on a $30m loan. Think about the returns that make such an investment remotely imaginable.

Basically what is happening in Kenya is that government borrowing, coupled with an inflation-wary central bank, has dried up the credit market. It is unfortunate that misperceptions of risk continue to limit entry of global firms into the finance space in many emerging economies like Kenya’s. The Kenyan government is now paying more than 20% on short-term domestic debt. Think about that for a second.

Prof. Ndung’u should stay, away with the whining MPs

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For once Kenya has a responsible academic running the Central Bank of Kenya (CBK). Prof. Njuguna Ndung’u has exuded nothing but confidence in his first term in office. Given that finance is a confidence game, this has been a most welcome scenario. It is therefore weird that there are MPs out there crowing that his reappointment be reviewed. Given the country’s political temperature this seems like a dumb misguided move. You remove Prof. Ndung’u and you might end up with someone who is down with printing money to pay for next year’s elections. I say let’s not play politics with the Central Bank.

I fully support Prof. Njuguna Ndung’u remaining as CBK governor. Just one request, echoing Jaindi over at the Daily Nation:

A piece of advice for Prof Ndung’u. You will go down as the best governor in the country’s history if you get the banks to reduce banking spreads. Commercial banks are fleecing borrowers.