The increase will apply to individuals borrowing up to Sh1,500, a segment that makes up the bulk of borrowers on the platform.
KCB M-Pesa has signed up seven million customers since its launch in March last year.
KCB has raised the borrowing limit for small loans on its mobile lending platform by up to 40 per cent as the battle for the lucrative micro-loan segment heats up.
Chief executive Joshua Oigara said Wednesday the increase would apply to individuals borrowing up to Sh1,500, a segment that makes up the bulk of borrowers on the platform.
Individuals normally have own caps as opposed to a collective band. The KCB platform imposes a ceiling on the amount a borrower can take based on usage patterns of the mobile money tool. The upper borrowing limit remains Sh100,000.
“All customers who have been good payers on KCB M-Pesa are getting their borrowing limit increased by 40 per cent, up to a limit of Sh1,500.
Fifty-seven per cent of our customers are borrowing below Sh1,000 and 40 per cent of the borrowers taking loans below Sh500,” he said.
Banks have been looking to ride on the popularity of mobile money in Kenya to grow their loans business, targeting customers who were previously unable to access formal credit facilities.
KCB M-Pesa has signed up seven million customers since its launch in March last year and according to Mr Oigara it handles 30,000 loan applications daily, disbursing an average of Sh50 million a day.
Since its launch, the platform has issued loans totalling Sh12 billion.
CBA, which runs the M-Shwari platform in partnership with Safaricom, has recently disclosed that it disburses loans worth Sh300 million daily via M-Shwari to an average of 70,000 Kenyans.
The lender had disbursed a cumulative Sh40 billion through M-Shwari by the end of last year to 12.6 million customers.
The competition for customer has seen both KCB and Equity Bank, which lends on its mobile platform Equitel, lower the interest rates on the mobile loans to conform to the rate cap that came into force earlier this month.
The lenders are hoping to recoup the loss of margins through higher lending volumes.
Equity, which was previously charging between three and nine per cent in monthly interest on the mobile loans, is now charging 0.65 per cent while KCB is charging 1.17 per cent, down from up to six per cent previously.
The banks have been able to ride on the fact that there are minimal costs associated with mobile loans, which are processed digitally without human intervention and paperwork.
CBA has, however, maintained that its 7.5 per cent fee on M-Shwari loans is not an interest rate and therefore would not be subject to the new rate law.
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