Kenya: M-Shwari Loan Charge Not Interest, CBA Tells Customers

 By Vincent Achuka

The Commercial Bank of Africa (CBA) says it will not reduce the facilitation fee it charges on M-Shwari as demanded by the Consumers Federation of Kenya (Cofek), saying the charge is not interest and, therefore, does not fall under those affected by the Banking Amendment Act 2016.

Confusion surrounding the law capping bank interest rates, which came into effect on Wednesday, continues, with lenders' interpretations on the new regulations differing.

Cofek on Thursday gave CBA and Kenya Commercial Bank (KCB) 48 hours to reduce their mobile phone-based loans to a maximum of 14.5 per cent interest rate per year or face legal action.

But while KCB and Equity have since lowered their cost of credit on M-Pesa based loans, CBA, which identifies its charge as a facilitation fee says it is not necessary since it is already lower than the 14.5 per cent as required by the new law.

"There is no interest levied on M-Shwari loans. What we have is a one off facilitation fee of 7.5 per cent charged at disbursement," Mr Eric Muriuki, the general manager new business ventures at CBA told the Daily Nation. "Furthermore, our loans last only 30 days compared to competing products that have longer tenures," he said.

CBA's M-Shwari was the first to be launched in the market in 2012 in partnership with Safaricom's M-Pesa and currently heads the pack, disbursing at least Sh300 million daily according to data from the bank.

On Thursday, Cofek said whether offered directly or indirectly, any loan whether disbursed through an agent or any other technology, as so long it is from a bank, should not be charged any interest higher that 4 per cent above the Central bank recommended percentage.

SOURCE:DAILY NATION