KCB changes tack with one month mobile loan

The Kenya Commercial Bank (KCB) has scrapped three and six month loans on its mobile loan system KCB M-Pesa.

At the same time the bank has introduced a one off negotiation fee and an excise duty charge on the negotiation fee pushing up the interest charged on the mobile loan.

According to the bank, the mobile loans on KCB M-Pesa will attract an interest charge of 1.16 percent, a negotiation fee of 2.5 percent of the loan amount as well as an excise duty charge equivalent to 0.25 percent of the loan.

The charges push the effective rate of the loan to 3.9 percent.

The changes come just two days after the bank resumed lending on the mobile platform after a six day glitch occasioned by a surge in loan requests.

The bank announced that all its loan products would be capped in line with the Bank Amendment Act.

The move to scrap to the three and six moth repayment options for the mobile loans comes as banks tweak their mobile loan products.

Previously, the bank charged a monthly loan interest of six per cent for one month, five per cent for three months and four per cent for six.

According to the bank the negotiation fee covers the cost of issuing the loan.

Another change to the KCB M-Pesa loan is the introduction of a roll over facility for customers unable to repay the loan within the month.

The KCB M-Pesa, ran in partnership with Safaricom, has issued Sh12 billion in loans since its launch in 2015.

Commercial Bank of Africa (CBA) is the only bank that previously offered a one moth loan.

Unlike other banks charging interest on the loan, CBA charges a 7.5 percent facilitation fee, which it insists was approved by the Central Bank of Kenya and thus not subject to the 14 percent interest rate cap.

CBA runs M-Shwari also in partnership with Safaricom, and has since 2014 issued Sh40 billion worth of loans.