Equity to extend new lending rules to mobile borrowers

The bank’s chief executive, Mr James Mwangi, said in a statement that the loans will be on a reducing balance basis, which is cheaper than on flat rate basis.

Eazzy loans, the banks mobile loans, will attract a monthly interest of about 0.65 per cent, on a reducing balance.

“Equity Bank has interpreted this [the new law] to include all credit facilities extended to customers by such institutions. This includes loans through mobile phones or through other third party platforms or collaborations with mobile network operators (MNOs), credit card facilities as well as micro finance loans,” said Mr Mwangi.

Some of the banks have argued that the mobile-based loans are not really charged interest but a transactional fee and, therefore, do not come under the purview of the regulated interest rates.

Huge source of income

Mobile loans have been a huge source of income for commercial banks, which have been dispensing billions with annual rates of between 60 per cent to over 100 per cent.

CBA said it would retain its loan facility fees unchanged at a flat rate of 7.5 per cent, in a communication sent out to M-Shwari customers yesterday.

The bank, however, said it would pay M-Shwari deposits a return as per the new law at 7.35 per cent, which is 70 per cent of the Central Bank Rate (CBR).

Mr Mwangi said that its deposit products would also attract an annual return of 7.35 per cent. The bank cited five deposit accounts which will earn interest, being those associated with school fees accumulation, group accounts, fixed account and purely saving accounts dubbed Jijenge account.

Hit threshold

Customers saving with the different interest earning accounts will, however, be required to hit a specific threshold, depending on the type of the account so as to start earning a return.

Banks have in recent days rushed to reclassify deposit accounts to avoid paying the huge interests on client funds.

Some banks have told their customers that only fixed accounts are qualified to benefit from the deposit rate.

SOURCE:BUSINESSDAILYAFRICA