Plan to enhance discipline in Kenyan banking industry gets backing

A proposal by the Central Bank of Kenya to introduce a banking sector charter to instill discipline in the industry has received backing, with analysts noting it would streamline financial services.

The apex bank is drafting the charter that will help guide the sector to make it responsive to the needs of the banked population.

“The charter will facilitate a market-driven transformation of the Kenyan banking sector and bring about tangible benefits for Kenyans, specifically to increase access to affordable financial services for the unbanked and underserved population,” said Cytonn, a Nairobi-based investment firm in a brief Thursday.

The firm noted that if adopted, the Banking Sector Charter will go a long way in removing the existing opacity in loan prices and promote the adoption of the risk-based loan-pricing framework.

“The charter will promote robust disclosures on cost of credit, free and accessible consumer education and enforcement of disclosures on borrowings and interest rates,” said Cytonn.

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The firm further called for the leveling of the playing field by making tax incentives offered to banks available to non-bank funding entities and capital markets products such as unit trust funds and private investment funds to stimulate access to credit and widen funding options.