M-Shwari loan charge not interest, CBA tells customers
A Commercial Bank of Africa (CBA) branch along Kirinyaga road on March 10, 2016. FILE PHOTO | SALATON NJAU
What you need to know:
While KCB and Equity have since lowered their cost of credit on M-Pesa based loans, CBA - which identifies its charge as a facilitation fee - says it is not necessary since it is already lower than the 14.5 per cent as required by the new law.
The Commercial Bank of Africa (CBA) says it will not reduce the facilitation fee it charges on M-Shwari despite pressure from a consumers lobby, saying the charge is not interest and therefore does not fall under those affected by the Banking Amendment Act 2016.
The Consumers Federation of Kenya (Cofek) on Thursday gave KCB and CBA a 48-hour ultimatum to reduce interest charged on their mobile phone-based loans to a maximum of 14.5 per cent interest rate per year or face legal action.
But while KCB and Equity have since lowered their cost of credit on M-Pesa based loans, CBA - which identifies its charge as a facilitation fee - says it is not necessary since it is already lower than the 14.5 per cent as required by the new law.
“There is no interest levied on M-Shwari loans. What we have is a one off facilitation fee of 7.5 per cent charged at disbursement,” Mr Eric Muriuki, the general manager new business ventures at CBA told the Nation.
“Furthermore, our loans last only 30 days compared to competing products that have longer tenures,” he said.
CBA’s M-Shwari was first launched in 2012 in partnership with Safaricom’s M-Pesa and currently heads the pack, disbursing at least Sh300 million in mobile loans daily according to data from the bank.
On Thursday, Cofek said any mobile-based loan should not be charged interest higher that 4 per cent above the Central bank recommended percentage.
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