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Question
Give reasons why majority of Kenyans fear to borrow money from commercial banks.
Terms
Eligibility
Commercial banks are limited companies that need to meet stipulated business standards. Specified proof of ability to repay is a conditions that the commercial bank cannot altered. Most Kenyans fear they may not meet the preset conditions.
Unclear Terms
The official procedures involve numerous paperwork that is professional in nature. The average Kenyan may not understand or have time to read all the paperwork.. Kenyans fear to sign into contracts they do not understand.
Unpredictable Interest rates.
The fixed Commercial bank rates are higher than the floating rates. The floating rates that are lower however are unpredictable hence the Kenyan borrower is unable to assess their own ability to repay the loan.
Flexibility
Kenyans deem commercial banks borrowing terms stringent compared to the other available options. Today there are numerous upcoming financial lenders with varying repayment methods. Supply and demand forces consequently come into play. The upcoming money lenders therefore relax the repayment terms to be able to compete with bigger established commercial lenders.
Unpredictable income.
Major financial strides in life are sometimes only achieved through borrowed funds. Though most Kenyans appreciate this fact, most of them are self employed meaning their income most of the time is unpredictable. When business is low, it may not be possible to meet the repayment deadlines. For this reason they need to borrow from a lender who will understand that their income generation may vary. A lender who will respond to their varying circumstances favorably. The size of most commercial banks cannot permit these variations.
Behavioural issues
Unlike the smaller money lenders who have a one on one contact with nearly all their client base, Commercial banks are large companies that cannot pay attention to insignificant clients. Most Kenyans fall in this class and therefore fear being misunderstood.
penny1955 answered the question on June 19, 2018 at 17:20
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