It amazes me when everywhere I turn, I am bombarded with adverts from banks on this or that loan and how easy it is to get them; Agents trying to sell loan from banks are nowadays more of pests than insurance agents who will never fail to turn for an appointment even though they know the said appointments were made to dismiss them at that time
In the not too distant past, it was pure agony for an ordinary Kenyan to get a loan from any of the mainstream banks. The myriad requirements one needed to qualify was clearly meant to deny him/she the loan. The banks were not bothered with the small loan seekers whom they considered as high risk. After all, with little effort, they made tidy amounts of money by collecting depositors cash at ridiculous interest rates and channeling the same to Government, which then, by virtue of not being in very cozy relationship with the bilateral donors, needed every coin it could borrow to fund it’s recurrent expenditure and also control a spiraling inflation. At the height of this crisis Banks earned 75% interest from T bills. With this source of easy money banks could hardly conceal their contempt for the small earners like teachers’, civil servants, farmers and other workers with no titles describing their jobs. Minimum deposits were hiked, new commissions like withdrawal and deposits were introduced. In the end, banking halls were getting emptier by the day as the small size account holders were being expelled from the banking halls. High net worth individuals, large companies and multinationals directors became the preferred visitors to the banks
Nature abhors a vacuum, so the saying goes. The so called small depositors who still had financial needs to educate their children, build houses for the family and generally grow had to get this need met by someone. In came Cooperative societies. Whereas the Big banks needed huge securities, impossible for many to have, to get advanced with money, all the Co-op’s needed was a pay slip and the confidence of fellow workers in the same co-op that he/she would pay a loan advanced. This was the channel which enabled millions of Kenyans within the low to middle income group to educate their kids and to generally develop themselves. You joined a co-operative, saved for a while and applied for loans from the co-op at between 2 and 3 times the amount saved so long as you could get four other members to guarantee you and life rolled on
Co-operatives too had their limitation in that one had to be employed within a specific organization to join it. As we progressed the informal sector was swelling up due to an underperforming economy which led to massive unemployment levels. However even people in this sector too had financial needs. This vacuum created Microfinance institutions. Finally the Mama mbogas of this world had someone to lend them some money no matter how small.
It is therefore a bit annoying for the big banks to start competing with institutions which developed from their arrogance and greed for fellows the bank had no value for while good times lasted. It is our responsibility to ensure that these institutions which took care of us in times of need are not crashed by the giants. By not deserting these institutions in droves for the bigger suitors, we might give them a much needed lifeline. After all, we are not sure how long we will remain attractive to the big boys. I hope the banks which have grown from this stable like Equity and Family Finance will remain committed to the small depositors which their multinational brothers like Barclays and Stanchart are only too willing to kick out when circumstances change
In the not too distant past, it was pure agony for an ordinary Kenyan to get a loan from any of the mainstream banks. The myriad requirements one needed to qualify was clearly meant to deny him/she the loan. The banks were not bothered with the small loan seekers whom they considered as high risk. After all, with little effort, they made tidy amounts of money by collecting depositors cash at ridiculous interest rates and channeling the same to Government, which then, by virtue of not being in very cozy relationship with the bilateral donors, needed every coin it could borrow to fund it’s recurrent expenditure and also control a spiraling inflation. At the height of this crisis Banks earned 75% interest from T bills. With this source of easy money banks could hardly conceal their contempt for the small earners like teachers’, civil servants, farmers and other workers with no titles describing their jobs. Minimum deposits were hiked, new commissions like withdrawal and deposits were introduced. In the end, banking halls were getting emptier by the day as the small size account holders were being expelled from the banking halls. High net worth individuals, large companies and multinationals directors became the preferred visitors to the banks
Nature abhors a vacuum, so the saying goes. The so called small depositors who still had financial needs to educate their children, build houses for the family and generally grow had to get this need met by someone. In came Cooperative societies. Whereas the Big banks needed huge securities, impossible for many to have, to get advanced with money, all the Co-op’s needed was a pay slip and the confidence of fellow workers in the same co-op that he/she would pay a loan advanced. This was the channel which enabled millions of Kenyans within the low to middle income group to educate their kids and to generally develop themselves. You joined a co-operative, saved for a while and applied for loans from the co-op at between 2 and 3 times the amount saved so long as you could get four other members to guarantee you and life rolled on
Co-operatives too had their limitation in that one had to be employed within a specific organization to join it. As we progressed the informal sector was swelling up due to an underperforming economy which led to massive unemployment levels. However even people in this sector too had financial needs. This vacuum created Microfinance institutions. Finally the Mama mbogas of this world had someone to lend them some money no matter how small.
It is therefore a bit annoying for the big banks to start competing with institutions which developed from their arrogance and greed for fellows the bank had no value for while good times lasted. It is our responsibility to ensure that these institutions which took care of us in times of need are not crashed by the giants. By not deserting these institutions in droves for the bigger suitors, we might give them a much needed lifeline. After all, we are not sure how long we will remain attractive to the big boys. I hope the banks which have grown from this stable like Equity and Family Finance will remain committed to the small depositors which their multinational brothers like Barclays and Stanchart are only too willing to kick out when circumstances change
4 comments:
it's amazing how you have detailed the development of the banking sector. thanks for educating me on this. being a 8-4-4 material some of this facts passed us by as we were still very young n in school.
whats your take on the political banks in kenya? specifically, in the current Kibaki's government.
ka-investor, thanks for stopping by. In my opinion, there are no political banks in the current regime. Some negativists have been trying to impute political patronage as to the reason of Equity's phenominal growth. This s all bull****
JK, like your analysis. Guys who have kept faith with Equity are now doing very well. I think FF will be the same though I was very disappointed that they lost their CEO.
MainaT, Thanks for your compliment. If I was lighter I woul be blushing. I love your blog too and I am glad I have made it to your your preferred blogsites
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