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The Unbanked are Likely to Remain So

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With the number of new bank branches opened in the past year and the growth in the number and variety of accounts on offer, it would be easy to assume that Kenya is on the way to becoming fully financially integrated. But as an article by Winfred Kagwe in the Nation points out, the banks could be doing their customers a disservice.

With interest rates on savings accounts so low, and with the plethora of service charges levied on current accounts, it is easy to see why those of limited or moderate means might choose to keep their money in cash rather than place it into an account. Maintaining an account may simply be too expensive for some.

Despite changes to the Banking Act, there still appears to be too much scope for banks to take advantage of their customer. It could be argued that this is fair enough; they are, after all, in business to make money. However, by deterring depositors through high charges or unattractive rates, banks may actually be shooting themselves in the foot, as this then forces them to look to the commercial markets to raise money, rather than being able to rely on their cash reserves.

The Financial Sector Deepening (FSD) Trust would do well to lobby the banking sector and the government for the implementation of a new banking code, setting out limits on the number and level of charges to be levied on accounts. The banking sector itself might also want to examine the possibility of forming some sort of consensus regarding ATM charges. This however, is unlikely to happen while these charges remain profitable.

Essentially, the first bank to break ranks and offer “free” banking, with penalties imposed for bad customer behaviour instead of charging for normal services, will probably make deep and rapid inroads into the unbanked sector. Other banks might then follow suit. Sadly, this is does not seem like a possibility in the near future. In the meantime, the unbanked will continue to shun accounts that offer them few benefits but far too many costs.

[Image by GenVessel]

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