INFOTRAK HARRIS POLL IN PARTNERSHIP WITH COFEK ON BANK INTEREST RATES Background on Bank Lending Rates Background • Despite clear signals from the Central Bank of Kenya on the direction interest rates ought to take in the market, commercial banks have been slow to respond. Weeks after the monetary policy committee cut its base lending rate from 18 to 16.5 % only few banks have announced a reduction in interest rates. This could be a concern for many borrowers who have had to struggle with a high interest environment • Furthermore, the Interest Rate Spread in Kenya’s commercial banks may remain wide, unless banks manage to increase their customer deposits. – Interest rate spread can simply be defined as the interest charged by banks on loans to customers, minus the interest that banks pay on savings deposits. • Analysts have alluded to the fact that despite many Kenyans urging banks to increase the interest customers gain on deposits, current deposit levels are still too low to fund the deposit interest. Kenya Interest Rates • The benchmark interest rate in Kenya was last reported at 16.5% • Historically, from 1991 until 2012, Kenya Interest Rate averaged 15% reaching an all time high of 84.67% in July of 1993 and a record low of 0.83% in September of 2003. • In Kenya, interest rates decisions are taken by The Monetary Policy Committee (MPC) of the Central Bank of Kenya. • The official interest rate since August 2005 is the Central Bank Rate (CBR), which replaced the 91-day Treasury Bill (TB) rate. Bank interest Rates Overview on BankTrak Survey Conducted amongst banking customers in April Some of us think today’s Customer is…… PATIENT? UNDERSTANDING? FORGIVING? IGNORANT? CREDULOUS ? UNDERSTANDING? I am Today’s Customer If you satisfy my wants with personal attention and a friendly touch, I will become a walking advertisement for your products. If you ignore my wants or show carelessness, inattention or poor manners, I shall simply cease to exist as far as you are concerned. I am more discerning Much more so than I was a few years ago. My needs are more complex. I have grown accustomed to better quality, better service and better value. My customers are much more demanding of me. I am an egotist – I am sensitive. I am proud. My ego needs the nourishment of friendly and professional contact from you. It is important to me that you appreciate my business. I am a perfectionist – I want the best I can get for the money I spend. If I am dissatisfied, I will criticize your products and services to anyone who will listen. Take heed: The source of my discontent lies in something you or the products you sell failed to do. Find that source and eliminate it, or you will loose my business and that of my friends as well. I am busy – I am called upon to know more, do more, and accomplish more in less time than even two years ago. I am, therefore, jealous of my time and if you cost me time, I will find someone who will satisfy my wants and needs with dispatch. Do not keep me waiting. To be forced to return products because of shoddy workmanship is the greatest waste of all. Reasons why Banking customers stop using banks they used in the past 6% 9% 9% 14% 39% 39% 0% 20% 40% 60% 80% 100% Require minimum balance Poor customer care services Poor branch network Slow Processing of loans High Banking rates, charges and hidden charges Long queues, slow in services delivery, congestion What customers like about their current banks 2% 3% 3% 5% 7% 7% 8% 9% 9% 20% 20% 37% 0% 20% 40% 60% 80% 100% Agent Banking Mobile banking services Use up to date technology Good reputation Stable bank hence security Offers variety of products and services Ease of accessibility to credit facilities Wide branch network Conveniently located Good customer care Affordable operational cost Fast and efficient banking services [...]... 50% 100% INFOTRAK HARRIS POLL IN PARTNERSHIP WITH COFEK ON BANK INTEREST RATES The Methodology • The poll was sponsored by Consumer Federation of Kenya (COFEK) and conducted by Infotrak Research & Consulting between 19th and 20th July, 2012 • A sample of 1000 respondents was interviewed to represent 6,916,000 middle class population residing in urban areas This translated into a minimum margin of error... consumers in the banking industry? – (Sufficient Reduction of loan lending rates) • Is the legal and institutional framework governing the banking sector sufficient to cushion consumers of banking services from capitalistic and profit oriented nature of commercial banks? Banking sector Views on lending Rates Only 35 % of respondents are satisfied with CBK role in regulating commercial banks 58% don’t... survey administration and data acquisition, data processing, and analysis  Today, Infotrak is one of the most authoritative pollsters in Kenya, providing political opinion polling under the Infotrak Harris Poll flagship brand In the recent constitutional referendum in Kenya, Infotrak was the only research firm which accurately predicted the outcome of the referendum  The company has retained both... lending rates to be adhered to by all commercial banks in Kenya? ABOUT INFOTRAK  Infotrak Research and Consulting (hereinafter referred to as Infotrak) is a highly reputed research company with exceptional qualifications and extensive experience in high quality research Infotrak s technical strengths lie in its ability to efficiently design and field social science surveys and impact evaluations of... field contacts in more than 12 other countries in Sub-Saharan Africa  The Research and Consultancy firm, which is currently one of the fastest growing in the region, attributes its rapid growth to not only innovation, high level of professionalism and dynamism, but also on the excellent caliber of personnel who have been described by many as “Business Minds who specialize in research” In 2007, Infotrak. .. 95% degree of confidence The survey was conducted in nine major towns in Kenya • Using the 2009 Kenya Population & Housing Census as the sample frame, the sample was designed using Population Proportionate to Size (PPS) and mainly entailed; – Use of stratification, random and systematic sampling in drawing regions to be covered – Ensuring further distribution by area, age , socio-economic class and... Commercial Banks take their increasing consideration when increasing their lending rates 94% consider that the standard Lending rates that should be adopted by commercial banks should be below 10% Suggested standard lending rates by respondents • Kenyans feel the current lending rates are too high and should not exceed the 10% threshold (1-5%) 38% (6-10%) 56% (Over 10%) 6% What should be the standard lending... manage survey, administrative, and program data for research and evaluation purposes  The company was founded and incorporated under the Laws of Kenya in 2004 following the vision of the founder to provide the Pan African Market with suitable information solutions required to sustain the needs of the ever-growing economies Headquartered in Nairobi Kenya, Infotrak also has affiliate offices in Uganda, Tanzania,...What Banks can do to make Customers Happy ? • In your opinion, what can banks do to make customers happy 45% Affordable interest rate 26% Good customer care 15% Ease of accessibility, wide banking network 12% Good quality services 9% Fast and efficient banking services Increase tellers 5% Wide ATM network services 4% Lower minimum balance charges 3% Offer mobile banking 3% 24_7 servicers... – Ensuring that every person in the sampled areas had a known chance of being selected • Fieldwork was using face to face interviews – – 25 of the interviews were back checked for quality control purposes and data entered twice for validation purposes Respondent selection was through random and systematic sampling • Data processing & analysis was carried using CS-Pro and SPSS 17.0 • The questions asked . INFOTRAK HARRIS POLL IN PARTNERSHIP WITH COFEK ON BANK INTEREST RATES Background on Bank Lending Rates Background • Despite. accessibility, wide banking network Good customer care Affordable interest rate INFOTRAK HARRIS POLL IN PARTNERSHIP WITH COFEK ON BANK INTEREST RATES The Methodology •