With rumors taking the rounds that Family Bank may be placed under receivership for its role in the Shs.1.6 billion theft at the National Youth Service (NYS)  and that nearly a half of the top banks are being investigated for their parts in the scam, Kenyans are wondering what’s happing in the banking industry.

In a statement to the media, Family Bank has denied having problems although its profits are said to have dropped by 40 per cent. The bank is ranked 12th largest in Kenya in terms of revenue and customers.

Kenyans have always expressed fears that the banking industry in Kenya is run by extremely dishonest people, but nothing was being done about it until the new Central Bank Governor Patrick Njoroge took over. Among the changes he has made is to curb interest rates that had gone amok with banks – even banks that should be respectable – charging as high as 35 per cent on loans to their poor customers and paying no interest on savings deposited by the very same poor customers. It was haram –  an unforgivable sin before God.

The banks naturally were unhappy with the curbing of interest on loans. They threatened, bullied and blackmailed. And eventually, they seem to have agreed to enter into a different kind of business – siphoning money from public coffers. It’s amazing that more than a half of the banks could be involved in such wicked crime.


The banks have been arguing that Kenyans are risky to lend money to in the absence of statistics to rate creditworthiness. But honest people have pointed out that Kenyans – the ordinary Kenyans – are  honest people who ferociously abide by the rules of the game. But they are overwhelmed by the banking industry’s iniquities. Just think of a bank where the director’s lend themselves, their wives, their children and their friends 90 per cent all the money in the bank. And then they just walk out and roam the streets with money spilling from their pockets while their poor customer run deranged, wondering how to pay salaries, pay for their very basic needs and maintain themselves and their families. Where should such a “banker” be? In hell burning in the largest fire that God can light up.

Interest Rates

We have said many times before that over exaggerated interest rates are like the proverbial thorn tree that grows from the ground with its thorns. They frame borrowers to default. And with the wickedness of banks, one time default starts a spiral – a pilling up of unthinkably high penalties. That leads to more defaults. And higher penalties.  And more defaults…. It is incontestably absurd.

Compare that to mobile banking where borrowers are far and dispersed – completely unknown and often inaccessible to the lender.  The default rate is an insignificant five per cent. One such lender is even based in the United States and the repayment rate is 95 per cent.

Banks have to begin to reassess their mode of operating their businesses.

In the meantime, Kenyans can  keep their money under the pillows and depend on loans from Sherlock. They aren’t different from the banks.