The Central Bank of Kenya (CBK) has called on Kenyan commercial banks to lower the cost of mobile phone-based loans.
CBK Governor for Patrick Njoroge said that the discussions should go beyond the exorbitant interest charged to processing and facilitation fees.
Kenyans have often complained through different forums that the loans are too expensive.
The commercial banks loans targeted are KCB M-Pesa from KCB Bank Group; M-Shwari from Commercial Bank of Africa; Timiza from Barclays Bank of Kenya; Equitel from Equity Bank and M-Co-op Cash from Co-operative Bank.
Though the law is mum on the pricing of mobile loans, since this is outside CBK’s regulatory control, Dr. Njoroge hopes that the banks will be more ‘appreciative of the burden to the customers and concerns of customers.”
He noted that it is a complicated issue even as one cannot look at the interest rate component, but other charges as well. ‘The charges are not part of that interest cap thing’, he observed.
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.
The mobile loans don’t also adhere to the interest rate cap law which was introduced in 2016.
Lawmakers have in recent months called for regulation of mobile phone-based lenders, saying they become predatory and are operating like shylocks.