Equitel loans to attract new 5pc processing fee
8 months ago, 16 Jan 09:19
Equity Bank has introduced a five per cent processing fee on its Equitel loans, as it seeks to buttress income that has taken a hit from interest rate capping and slow credit growth. The flat fee silently introduced nearly two months ago, puts Equity at par with other banks operating mobile lending products KCB and CBA, in collecting an upfront commission before charging interest on the loan. Equity Bank has also effected a money transfer commission on its mobile App, Eazzyapp, a product which used to be free for internal cash transfers. Transfers are now charged a fee of Ksh33 ($0.3) per transaction as the regional bank moves to tighten revenue from non-interest income sources. Profit drop The bank which is said to have turned a third quarter profit drop to full year growth, is also loosening its purse strings this year. Management is said to be looking at growing its loan book after a year of conservative lending policy which was largely attributed to a slow economy and interest rate caps. As per last year, the bank was issuing 8,500 loans on a daily basis through the mobile platform whose average size was Ksh8,200 ($82). This means the bank could earn more than Ksh1.2 billion ($12 million) from the processing fee in a year. Commission As at June last year, the bank had disbursed a total of Ksh57 billion ($570 million) through the mobile platform which was officially launched in 2015. The platform earned the bank Ksh949 million ($9.49 million) in commission in the nine months to September last year. During the period, 54.5 million transactions had been conducted through the mobile App service which is now being charged Ksh33 ($0.32). This means the introduction of the transaction fee will earn the bank more than Ksh1.5 billion ($14.5 million) annually. Pricing structures Kenyan banks are tweaking their pricing structures to increase their revenues in what has seen the average cost of credit in the country shoot to 19.1 per cent. This is a 5.1 percentage points above the statutory rate of 14 per cent set by the Central Bank of Kenya. The Banking (Amendment) Act, 2016, which came into force on September 14, 2016, caps loan charges at four percentage points above the Central Bank Rate, (CBR) presently standing at 10 per cent, and requires lenders to pay interest of at least 70 per cent of the CBR on term deposits. Bankers told The EastAfrican that most of them were now charging the highest price possible for services because this does not require authorisation from CBK to enforce. Most banks cite their price on a range basis allowing them to negotiate with potential customers within the margin without attracting the regulator’s curiosity. Any change of pricing or introduction of charges requires CBK’s approval but the Governor Patrick Njoroge has already indicated unwillingness to approve price changes that would negate the purpose of the interest rate caps — to maintain discipline in the sector. President Uhuru Kenyatta signed into law ...
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