The cost of banking in Kenya

Many Kenyan bank customers may not realize the significant impact that the cost of running their bank accounts can have on their finances. A recent report by FSD Kenya sheds light on this issue, revealing that the annual cost of maintaining a bank account in the country ranges from $35 to $130. The study surveyed 11 banks that collectively hold over 95% of the total deposits in the market, providing valuable insights into the cost dynamics of the banking sector. Eduardo Totolo, a Research Economist at FSD Kenya, emphasized the importance of understanding these costs, highlighting how being informed can save customers up to $100 or 10,000 shillings each year. One of the key points raised in the interview is the impact of these costs on customers, especially those in lower income brackets. Totolo pointed out that for many individuals, this amount is not insignificant and could be better utilized in other essential areas such as business, education, or healthcare. By knowing the cost of running their accounts, customers can make more informed decisions about their finances and potentially improve their overall economic well-being. Another crucial aspect highlighted in the discussion is the need for transparency in pricing and information dissemination by banks. While the credit market has seen efforts towards providing clear cost breakdowns to customers, the same level of transparency is lacking in the deposit side of banking. Totolo mentioned the importance of having tools like a total cost of credit calculator for deposits, similar to what the Kenya Bank Association launched for loans. Such tools can empower customers to compare account offerings and make sound financial choices. Moreover, the issue of disclosure practices within banks was brought to light during the conversation. Totolo mentioned that while the central bank requires banks to have tariff guides detailing transaction costs, many of these guides are outdated and challenging to navigate. Improving the transparency and accessibility of these guides can enhance customer understanding and trust in the banking system. Additionally, with the rise of digital disruptions and the emergence of fintech competitors, ensuring transparent and customer-centric practices is crucial for banks to maintain their relevance and credibility. In conclusion, the discussion with Eduardo Totolo underscored the vital role of transparency and customer awareness in the banking sector. By knowing the true cost of running their accounts and having access to clear pricing information, customers can make more informed decisions and ultimately benefit from a more competitive and customer-friendly banking environment.