KENYA: CBK pushes for lower mobile loan fees


The Central Bank of Kenya (CBK) has stepped up talks with banks to lower the cost of mobile phone-based loans amid claims they are saddling borrowers with expensive debt.

CBK Governor Patrick Njoroge said the discussions go beyond the the interest on loans to processing charges and facilitation fees.

KCB (KCB M-Pesa), Commercial Bank of Africa (M-Shwari), Equity Bank (Equitel), Co-operative Bank (M-Co-op Cash) and Barclays Bank of Kenya (Timiza) are some of tier-one commercial lenders which offer instant mobile loans.

The pricing of some of the mobile phone-based loans includes a huge component of fees, which is outside regulatory control.

“This is a bit more complicated. The issue is not just to look at it as interest rate component, but other charges as well. The charges are not part of that interest cap thing,” Dr Njoroge said.

M-Shwari, introduced by Safaricom and Commercial Bank of Africa in 2012, charges a “facilitation fee” of 7.5 per cent on credit regardless of its duration within a month. KCB-Mpesa loans include a one-off 2.5 per cent loan negotiation fee.

Banks and other mobile phone-based lenders are currently able to skirt a government cap on interest of four points above the central bank’s benchmark interest rate, which now stands at nine per cent —capping loans at 14 per cent.

A 7.5 per cent M-Shwari loan equates to an annualised interest rate of 90 per cent. The shortest loan repayment period is one week.

“This is where we are working with banks … to go beyond the law. You have seen how we have been doing things in terms of customer centricity, the way they have to relate to their customers,” Dr Njoroge said.

“The law itself does not tell them to do XYZ, but we are telling them to be appreciative of the burden to the customers and concerns of customers.”

Lawmakers have in recent months called for regulation of mobile phone-based lenders, saying they become predatory and are operating like shylocks.

Introduced in 2016 to stop banks charging high-interest rates, the interest rate cap has stifled traditional bank lending, opening the market for the mobile app lenders.