Kenya's banks face big challenges: Mwangi Mumero reports on the hotting-up of competition between the retail banks. But legislation is moving in favour of customers, who still want old-style savings accounts.(Banking)

COMPETITION IN THE industry has forced Kenyan banks to move into previously uncharted waters like mortgage finance, and a few that have ventured into this area have had to lick their wounds. With low interest rates accruing from government securities these days, banks have been forced to move back to their core business of lending money to customers.

According to the Central Bank of Kenya (CBK), this move has seen lending to customers grow to Ksh50bn in the last three years. The lending has mainly been in the form of personal loans and credit cards, and they have to contend with the emergence of savings and credit co-operatives (SACCOs) that have also ventured into offering banking services to their members.

Ironically though, these SACCOs have also benefited immensely from the small and medium enterprises (SME) schemes set up by …