NAIROBI Oct 7 Kenya's NIC Bank will
issue fewer credit cards and may demand collateral in some cases
because of a government cap on what banks can charge for loans,
its chief executive said.
The government capped commercial lending rates at 400 basis
points above the central bank's benchmark rate (CBR), now at 10
percent, last month, seeking to rein in banks which it said were
making increased profits at the expense of clients.
Some of Kenya's 45 lenders have reduced their unsecured
loans to customers deemed risky, since the rate cap while
privately-owned Family Bank, has offered its staff voluntary
early retirements to cut costs.
John Gachora, CEO of NIC, a mid-tier lender known for asset
financing, said it was now riskier to issue cards.
The credit card business accounts for 100 million shillings
($1 million) of NIC's annual revenue, but Gachora said it had
been growing fast before the rate cap as more Kenyans had
disposable income in line with the expanding economy.
Gachora did not give a figure for the number of cards the
bank has issued or the interest rates before the cap but Kenyan
lenders usually charged above 20 percent before the cap.
"Does it (the credit card business) go? No. But it has to
take a significantly new shape," he said, adding that NIC would
be more selective as it picks those who qualify for a card and
in some cases impose collateral.
"For some people it may require for them to (offer) cash
cover or cash collateralize a portion of their credit card."
The rate cap is expected to squeeze net interest margins for
banks, which averaged 7-10 percent before it came into force,
hurting shareholder returns. The cap also knocked bank shares.
KCB, the country's biggest bank group by assets,
said on Tuesday it expected its return on equity to drop by 400
basis points this year to 21 percent.
Kenyan lenders enjoy higher ROEs than their counterparts in
South Africa and Asia, both with an average of 18 percent, and
single figures in Europe and the United States.
($1 = 101.2000 Kenyan shillings)
(Reporting by Duncan Miriri; Editing by Edmund Blair and