Technology

Traditional lenders remain the first savings option for clients


Hundreds of Kenyans prefer to save their money in banks rather than mobile lending companies, a new report has shown, slashing the growth prospects of non-bank institutions in the country. PHOTO FILE | NMG

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  • HHundreds of Kenyans prefer to save their money in banks rather than with mobile lending companies, a new report has shown, slashing the growth prospects of non-bank institutions in the country.
  • Findings from Infortrak Research and Consulting in The Changing Face of Banking report revealed that four out of five Kenyan bankers would prefer to save their money at a bank primarily for security reasons as opposed to a non-bank institution.
  • The survey also showed that in terms of borrowing, about three-quarters (76%) would prefer to get loans from a bank, despite cheap credit still being threatened by mobile lending companies.

HHundreds of Kenyans prefer to save their money in banks rather than with mobile lending companies, a new report has shown, slashing the growth prospects of non-bank institutions in the country.

Findings from Infortrak Research and Consulting in The Changing Face of Banking report revealed that four out of five Kenyan bankers would prefer to save their money at a bank primarily for security reasons as opposed to a non-bank institution.

The survey also showed that in terms of borrowing, about three-quarters (76%) would prefer to get loans from a bank, despite cheap credit still being threatened by mobile lending companies.

“Compared to private lenders, banks can issue a larger amount of money. For example, while the maximum amount one can borrow from Tala is Sh 50,000 despite their creditworthiness, a bank can offer millions to the same borrower, especially if their credit rating is good, ”the report states.

Despite the above trend, the report which was carried out between May 12 and June 7, 2019 shows that a significant proportion of banked Kenyans prefer to obtain banking services from non-banks, thus threatening the main income generators of the lenders.

This trend, however, comes with many more opportunities than threats because a proportion of banked Kenyans prefer to take out insurance (47%), forex (50%), investment / wealth management (63%) and money transfer (66%) to a banking institution. , a non-bank financial institution in the region have performed well.

Therefore, given that banks are highly regarded as a one-stop-shop for various financial products and services, including those that are traditionally not part of their core business, this indicates that there is an opportunity.

“I don’t know if my bank sells insurance policies, but if they did offer any, I would rather buy from them than buy from an insurance company. I would trust my bank more than insurance companies that are known to sell fake covers, ”said one of the respondents who was sampled in the survey.

Borrowers, most of whom do not have access to traditional bank loans, are normally drawn to digital lenders who require relatively fewer documents and are quick to fork out the money.

Non-bank lenders charge borrowers annualized interest of between 18% and 200%.

Lenders have exploited a market that has become more lucrative than that of traditional banks, where lending rates are capped by law at 13%. Their entry was in response to an increase in demand for quick loans and the freeze on commercial bank loans to individuals and small businesses that followed the interest rate cap in 2016.

The list of seasoned players in this market includes Tala, Izwe, Branch and Letshengo.

The market is also served by new entrants such as Car & General, a company listed on the Nairobi Stock Exchange. Micro-lenders mainly offer short-term loans to borrowers, with terms ranging from a few days to a month, according to a survey by research firm Financial Sector Deepening (FSD).



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