Lenders tired of risk-based pricing model

Hello there ?????

It's Brian from The Kenyan Wall Street?

In today's newsletter, bankers are looking forward to departing from a risk-based pricing model.?

Also, Stima Sacco's financial performance looks good; the board says the KUSSCO fiasco were ‘insignificant’.?

These and more business stories today ; ?

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Lenders tired of risk-based pricing model

Kenyan banks are pushing for a shift away from risk-based loan pricing toward a standardized reference rate, arguing that the current system complicates rate adjustments and creates inconsistencies across the sector.

The Kenya Bankers Association, led by Stanbic CEO Joshua Oigara, has formally proposed the change to the Central Bank of Kenya (CBK), advocating for implementation by the end of 2025. The envisioned model would function similarly to the Secured Overnight Financing Rate (SOFR) used globally, establishing a uniform benchmark with risk premiums layered on top. Here is why banks want a standardized reference rate…

?? The Risk-Based Pricing model evaluates borrowers' risk profiles, including credit history, sector exposure, and repayment capacity, enabling banks to set individualized interest rates, allowing each bank to develop its own pricing model.?

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Stima Sacco Shrugs Off KUSCCO Loss

Stima Sacco took a KSh 108 million hit from its KUSCCO investment but is brushing it off like pocket change. CEO Gamaliel Hassan isn’t losing sleep over it, pointing out that the amount is a mere drop in its KSh 9 billion cash reserves.?

Instead of dwelling on the setback, the Sacco is flexing its financial muscles, reporting a solid 15% income growth in 2024, hitting KSh 10.3 billion. The secret sauce? A 55% surge in investment income and a 7% bump in interest earnings. And just in case anyone thought the KUSCCO loss would sting, Treasurer Mary Maalu made it clear: it’s only a provision, not a write-off—so if the money bounces back, it’ll be a nice little bonus. Here are the details

Breaking down the financials…

??Total income grew 15% to KSh 10.3 billion, driven by a 55% surge in investment income (KSh 1.7 billion) and a 7% rise in interest income (KSh 7.9 billion).

??Expenses dropped 5% to KSh 4.04 billion, boosting pre-tax surplus by 29% to KSh 6.2 billion.

??Assets grew 12% to KSh 66.4 billion, with loans rising 11% to KSh 50.2 billion and deposits up 8% to KSh 46.7 billion.

??Membership expanded 10% to 220,650, while dividends increased to 16% and interest rebates remained at 11%.

??Core capital-to-assets ratio hit 20.22%, surpassing the 18.8% target, and core capital-to-deposits reached 28.7%, far above the 10% minimum.

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