Kenyan importers wishing to obtain import letters of credit (L/Cs) could be much better off if they talked to Guardian and Habib AG Zurich banks instead of some of their competitors.

According to the Central Bank of Kenya (CBK), these two banks provide this facility to importers at no cost in a market apparently characterised by wide variations in service charges.

Most expensive

According to the CBK's monthly report on banking service costs, Dubai Bank is the most expensive import L/C provider in Kenya. For every import L/C the bank charges the importer 2 per cent of the amount involved.

Other expensive import L/C providers include Giro Commercial and Charter banks whose rates are fixed at 1.5 per cent and 1.25 per cent respectively.

Less expensive

City Finance, Fina and Stanbic Bank charges for the same facility is a fixed one per cent. The country's three top banks - Barclays, Standard Chartered and Kenya Commercial Bank (KCB) - charge 0.5 per cent.

National Industrial Credit (NIC) Bank and National Bank have their rates fixed at 0.45 per cent and 0.3 per cent respectively.

Import L/C amendments

The CBK also reports wide variations in L/C amendment fees charged by banks. It found that Charterhouse and Industrial Development (IDB) banks charge the highest commission for import L/C amendment at a standard fee of 5,000 Kenyan Shillings (Sh5,000).

NIC, Akiba and Consolidated banks charge Sh4,000, Sh3,578 and Sh3,000 respectively for the same service while Barclays, Standard Chartered and KCB charge Sh2,000.

Bank of India charges a flat rate of Sh500. Guardian Bank charges one per cent of the L/C amount while City Finance and Habib AG charge 0.75 per cent. IDB charges a 0.5 per cent commission for the service.

Export L/Cs

The CBK says 16 out of the Kenya's 42 banks charge establishment commission for export L/Cs.

Of those banks that charge, three charge a flat rate per quarter ranging from Sh2,000 at Guardian Bank to Sh1,000 at IDB while 13 banks charge a percentage of the amount of the L/C outstanding per quarter.

Percentage based charges for export L/Cs range from 2 per cent at Dubai Bank to 0.25 per cent at Paramount Universal Bank.

Export L/C amendments

Thirty banks charge commission for export L/C amendments. Fees range from Sh3,000 at Consolidated Bank to Sh494 at Paramount Bank. Development Bank charges 0.5 per cent of the amount for which the L/C is issued.

Publication of bank charges is part of CBK's efforts to enhance competition in the country's banking sector.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.