Banks target the tech-savvy with loans

Students, teachers and tech-savvy individuals have become the latest target of money lenders opening a new front by banks in race for control of the credit market.

Equity Bank made its intentions for the niche market known last week with the announcement of a partnership with Safaricom and the Kenya Institute of Education to sell computers to teachers on hire purchase terms.

Teachers will buy the laptops with broadband internet connection from Safaricom—signalling a shift in the bank’s strategy towards enhancing its lending business.

Mr James Mwangi, the chief executive at Equity, said the bank will offer credit to the over 240,000 teachers to buy the laptops -- a move he said should help in bridge the digital divide especially between urban and rural Kenya.

Safaricom will make acquisition of the devices possible through its retail networks across Kenya.

Under the deal, teachers can secure loans of between Sh20,000 and Sh75, 000 and pay through a check-off system at the rate of 16 per cent reducing balance or eight per cent fixed interest.

The bank also signed a Sh1 billion financing agreement with Kenyatta University, to provide laptop credit targeting the over 30,000 staff and students.

The bank is eyeing other universities, in a move that will see it tap into the over 100,000 tech-savvy market.

Last month, the bank cut a deal with African pay-TV operator MultiChoice leveraging on the need to for soccer fans catch the World Cup action live on SuperSport by offering unsecured loans for DSTV connection.

Under the arrangement, Equity Bank also extended soft loan to potential subscribers to buy MultiChoice DStv decoders and TV sets.

Early in this year, Kenya Commercial Bank and Equity Bank launched a marketing partnership with Safaricom to provide credit facilities for purchases of laptops.

According to analysts, such partnerships provide a win-win situation where the banks grow their loan portfolio, telecoms spur their Internet device sales as they strive to grow their data business and the consumer secures competitive credit facilities.

“Banks profits today are pegged on an increase in their lending services meaning that they have to be innovative and more focused on niche groups to keep momentum on growing their loan books,” said Ms Wanjiru Kimani, a marketing consultant.

“Banks have a substantial floating liquidity that is not being fully utilised and we expect them to roll out more innovative products to attract borrowing,” said Mr Timothy Kosuri, a marketing executive.

Figures from the Central Bank of Kenya (CBK) indicate that since the beginning of this year, domestic credit grew by 26.6 per cent as at June 2010.

With the banking sector remaining liquid, banks have been aggressive in providing unsecured lending products, especially to those in salaried employment.

The liquidity ratio now stands at over 40 per cent, above the 22 per cent threshold required by the CBK.

This comes a month after the kick off of sharing of credit referencing among banks, a move that is likely to reduce the transaction time for securing loans and enable banks price loans based on a borrower’s risk profile thus easily isolating serial loan defaulters.

The Kenya Bankers Association (KBA) have reported impressive compliance by commercial banks in the implementation of customer credit information sharing exercise.