Hidden Bank Charges Kenyan Entrepreneurs Should Know About
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Many Kenyan entrepreneurs are unknowingly losing significant amounts of money due to hidden bank charges buried within everyday transactions. While banks present themselves as trusted financial partners, a deeper look into their fee structures reveals a range of hidden charges that can quietly eat into business profits.
Understanding these fees is essential for any entrepreneur aiming to maintain financial stability and transparency in their operations.
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Loan Arrangement Fees
When applying for a loan, banks usually deduct an upfront fee, often labeled as a “processing” or “arrangement” fee. This can range from 1% to 3% of the total loan. For example, a Sh 4 million loan could see Sh 100,000 shaved off immediately, before the entrepreneur even receives the funds.
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Loan Insurance Charges
Many banks require borrowers to take loan insurance, which is meant to cover the risk of default. While this might seem like a reasonable precaution, the fees are often tucked away in the loan documentation. A typical insurance charge might be Sh 84,000 on a Sh 4 million loan.
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High Effective Interest Rates
Although interest rates are disclosed, the actual cost of borrowing is often much higher due to compounding. A 20% annual interest rate might end up costing the borrower 50% more over time, especially if repayment is spread out over several years.
Read: Bank Lending Rates in Kenya 2025
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Monthly Account Maintenance Fees
Operating a business bank account often comes with recurring fees, typically between Sh 150 and Sh 1,120. These charges apply even if the account sees minimal activity, adding up to thousands annually.
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Transaction Charges
Whether you’re withdrawing cash, making mobile transfers, or processing cheques, transaction fees are almost unavoidable. ATM withdrawals can cost between Sh 30 and Sh 150 per transaction. Bank-to-M-Pesa transfers may be charged at a rate of 0.05% or more on larger amounts.
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Overdraft and Overnight Charges
Banks often charge overnight fees on overdrawn accounts, which can go as high as 10% per night. Overdrawing your account by Sh 50,000 could result in an additional Sh 5,000 fee for each day the overdraft remains unsettled.
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Hidden Mortgage-Related Fees
For entrepreneurs leveraging property as collateral, banks often impose valuation fees, legal charges, stamp duty (up to 4% of property value), and title transfer costs. Together, these can exceed 10% of the total mortgage, excluding interest.
Read: Common Banking Scams in Kenya and How to Avoid Them
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Deposit Mobilization Charges
Originally designed to discourage overdrawing via bounced cheques, some banks now impose this fee broadly on loans and overdrafts. It’s typically justified as a cost of “mobilizing” funds but is rarely explained transparently.
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Late Payment Penalties
Failing to meet a loan repayment deadline can attract penalties and additional interest. This not only increases the loan burden but may also affect the entrepreneur’s credit standing.
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Currency Conversion Fees
Entrepreneurs who engage in international trade or receive foreign payments should be aware of hidden forex fees. Banks may charge between 2% and 5% on currency conversions, often masked within the exchange rate rather than listed as a separate charge.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.
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