[Kenya] KCB resumes lending on mobile money platform, cuts interest rate
Kenya Commercial Bank has resumed lending on the KCB Mpesa mobile banking product, effectively boosting the lender’s financial technology agenda.
Group CEO and MD Joshua Oigara on Wednesday apologised to customers saying a technical hitch affected the platform as it was undergoing adjustments last week.
He said the adjustment was meant to guarantee better services and enhance security for its 7 million customers.
“The system review now allows the bank to accommodate more loan requests. We have also enhanced the credit scoring model as our way of deepening uptake of financial services,” Oigara said.
Since the launch of KCB Mpesa in March 2015, KCB has extended financial services to over 7 million customers, disbursing at least Sh12 billion in loans. The average value of loans per customer is Sh1800.
Following the enactment of the Banking (Amendment) Act 2016 that capped interest rates at not more than 4 per cent of the Central Bank rate, KCB has lowered rates on all its loans to 14 per cent.
KCB Mpesa loans will now be charged 1.16 per cent per month, down from 6 per cent previously.
A one off negotiation fee of 2.5 per cent will also be applied to loan applications. Excise duty (tax) is applicable on the non interest rate fees/negotiation fees, as required by law.
“We have seen a sharp rise in loan requests on all our mobile loans following the decrease in interest rates, meaning the platform remains central in further deepening the financial inclusion agenda,” said Oigara.
As one of the pioneering mobile loan services in East Africa, KCB MPesa is a revolutionary mobile solution to the unbanked, enhancing the financial inclusion agenda of the bank.
Latest statistics show that at least 40 per cent of the loans processed through KCB MPesa are below Sh500 and 57 per cent are below Sh1000. This indicated that the service is providing affordable finance to users across all income levels.
KCB had quietly suspended lending via the popular KCB MPesa mobile banking platform prompting fears of credit rationing for small-scale borrowers in the wake of new rate capping law.
The move, which caught many off guard, has raised concern among the more than six million account holders signed up on the platform.
Only those with outstanding loans can access the service to enable them repay loans.
New loan issuance has been disabled on the platform, accessed through short code *844#.