A recent survey by the Central Bank of Kenya (CBK) on financial inclusion shows that Savings and Credit Cooperative Societies (Saccos), have the highest rates of hidden charges.
The survey, done in partnership with the Kenya National Bureau of Statistics (KNBS) and the Financial Sector Deepening (FSD), the financial service providers indicated that incidences of unexpected and unclear charges have sharply risen compared to the previous years, with the highest increase being reported for Saccos and Microfinance institutions.
Saccos recorded a sharp increase from 5.5 per cent in 2019 to 46 per cent in 2021, whereas microlenders, commonly referred to as digital lenders, have increased charges from 8.8 per cent to 46 per cent.
Microlenders reported the second incidences of unexpected and unclear charges with an increase from 8.8 per cent in 2019 to 45.3 per cent in 2021.
The report has elicited mixed reactions from different members of the financial institutions, with some disagreeing with it.
George Ototo, the Managing Director of Kenya Union of Savings and Credit Co-operatives Limited, noted that he does not agree with the findings, adding that charges are agreed upon by members.
“All charges are agreed upon with the members during the Annual General Meetings. They approve before the charges are implemented,” Ototo remarked.
The survey followed the Competition Authority of Kenya's (CAK) investigation on complaints that the lenders do not provide full information to borrowers on pricing, punishment for defaults, and recovery of unpaid loans.
Similarly, the report showed that financial service providers do not provide enough information on products and services charges adding that consumers had the right to access information on charges so as to make informed decisions.
“Transparency in costs associated with the use of a service by providers ensures all users have the information they require to make informed decisions on certain products or services,” the survey reads in part.
Saccos have played a major role in the financial industry with many Kenyans saving and getting credit from them. Over the years, Saccos have increased from 10,463 to 11,723.