When COVID-19 started few months ago, most of people thought it is public health issue for China and so it shall remain to be. However, as days goes by, Chinese authorities got rid of the virus infections while the rest of the world continue to get infections and struggle to fight it. Financial institutions and their regulators have joined the fight by putting in place several safety measures to curb the spread of infections to customers and employees whereas monetary policy measures were taken by CBK aimed to protect the consumers and financial service providers from negative financial impact of the virus.
Central Bank of Kenya issued a press release with six (6) point’s emergency measures to ease economic effects to bank borrowers. Then Kenya Bankers Association (KBA), umbrella body for banks in Kenya also issued a press release on measures they are taking or going to take soon such as providing relief on loans through tenor extensions and restructuring arrangements to those clients affected by the pandemic.
According to CBK, banks shall bear all costs of such extension and restructuring of those loans. However, the press release is a press release until proved that it was a directive in which penalty can be imposed on a bank that violate it. Can the CBK receive client’s complaints on the same and able to take corrective measures against banks that violate its press release? Time will tell. Meantime, I can advise bank’s clients not to celebrate yet and explore your options to avoid the risk of foreclosure. Banks except a few, have by nature predatory tendency to protect themselves at the time of crisis-even against their customers!
On the side of safety, KBA press release advice for use of alternative banking channels to be used such as mobile banking, internet banking, debit and credit cards. Besides, all charges for transfers between mobile money wallets and bank accounts have been removed. Furthermore, there are hand sanitizers as well as frequent clean up on high touch areas without forgetting 1 meter or 3 feet social distancing in branch halls.
Are these measures enough? Isn’t this the time for bank’s shareholders and management to be on the customer’s side by going extra mile as the Kenyan government executive wing have done to cut employment income? What else can be done? Below are my three proposed extra measures.
· Give back. Banks should consider reduction of more fees such as transaction charges and costs of credit. Our local banks should learn from their counterparts in Abu-Dhabi who have put in place 17 initiatives for individuals, SMEs and everyone. Can’t they provide financial support to cover costs of treating their customers infected by the disease? To a large extent, they should mobilize their resources to assist the government measures to fight the pandemic through focused and coordinated CSR initiatives. State Bank of India committed 0.25% of its 2019-20 to fight the pandemic in India. Can’t our Kenyan banks commit 2.5% for the same?
· Educate and engage to empower. Banks should send preventive short text messages (SMS) to their customers on best ways to protect themselves and their families as well as providing them with relevant information on where to seek assistance. For businesses at risk in vulnerable sectors such as transporters, hospitality and others with credit facilities, it is time to engage them other than adoption ‘wait and see’ attitude. Be proactive.
· Forbearance program. Each day it becomes clear which businesses and individuals are impacted. Rather than wait for the customer to apply for loan relief, can’t they introduce automatic credit payment moratorium for at least three months to these customers? Hong Leong Bank of Malaysia has done just that for six months.
Finally, the banks had for many years faced reputational challenges as ‘inhuman’ but I hope with some extra measures this perception can still be challenged. More important, other financial and non-financial sector players such as insurance firms, microfinance firms, pension funds, SACCOs among others should come out loudly to portray duty of care to Kenyans.