KCB changes tune on M-Pesa loan account
Published on: September 16, 2016 10:30 (EAT)
The Kenya Commercial Bank (KCB) has made a hasty retreat on its hard-line stance on micro mobile loans, saying they will attract the 14.5 percent interest rate cap. This comes after weeks of hesitation by the country’s largest bank by assets, which challenged that the loans did not fall under the new Banking Amendment Act. In an apparent change in tact, KCB has written to its customers informing them that the bank had changed the pricing of all its loan products to include the mobile loans. “We wish to inform our existing and potential customers that we have adjusted the pricing for all our local currency loan facilities. These changes include KCB M-Pesa, KCB Mobi loans & local currency deposits pursuant to the Banking (Amendment) Act,” KCB wrote on its official twitter page. KCB has partnered with Safaricom to create the KCB- M-Pesa account, where customers can make deposits, withdrawals and even loan applications without having to go to a branch. Safaricom has welcomed the move by KCB saying customers will benefit from cheap loans. “We welcome today’s decision by our partner KCB Bank Kenya to lower interest rates for the KCB mobile money product in line with the recently adopted Banking (Amendment) Act 2016,” Safaricom Chief Executive Officer Bob Collymore said. `The move comes just days after Equity Bank announced that its mobile base loan product, Eazzy loan, will be priced at 14.5 percent per annum on a reducing balance. This translates to about 0.7 percent per month. Equity has the advantage of being able to process the mobile loans through its own virtual mobile network while the other banks have to go through a mobile operator. “So even for collaborations the law applies. That’s why we said whether its credit cards, mobile loans, microfinance, asset finance, consumer or even unsecured, interest rates have now been legislated and there is no window to manipulate the law,” Equity Bank chief executive officer James Mwangi said on Tuesday. Commercial Bank of Africa (CBA) which runs the M-Shwari account also with Safaricom is yet to align its interest rates with the new law. The bank has however written to its customers that deposits on the account will attract an interest rate of 7.35 percent. “Loan facility fees remain unchanged at 7.5 percent per loan,” CBA said in a notice to customers. The Consumer Federation of Kenya (COFEK) on Thursday gave KCB and CBA a two day notice to price their micro mobile loans on the new law or have their stand challenged in court.