Definition of a Standard Measure for Consumer Interest Rates in Kenya: A Scoping Study

This scoping study initiated by Financial Sector Deepening (FSD) Kenya and the Central Bank of Kenya aims to develop options for a standard measure for consumer interest rates in Kenya and to make recommendations on how to implement a disclosure regime. Its objective is to promote greater transparency and consumer protection within the Kenyan financial sector.

The study discusses elements of a comprehensive disclosure regime including the identification of an appropriate interest rate measure, calculation methodologies for a standard rate, required regulation for compliance and enforcement, disclosure requirements, dissemination channels and initiatives to support the process and create consumer awareness.

It concludes that there is a strong case for a standard interest rate measure to be adopted in the Kenyan market, supported by regulation and with a focus on sustained dissemination. Recommendations include:

• Disclosure regime needs to be comprehensive in terms of scope, encompassing all institutions in the financial sector in terms of regulation, enforcement and compliance;
• Regulation around the regime should follow the European Union model with tightly defined standards and requirements;
• Enforcement, accurate dissemination and compliance will require regulatory oversight.