Equity Bank plans to process mortgages and asset-backed loans using its mobile platform in a move meant to grow its loan book.
The bank’s management disclosed that the loan appraisal process will be automated with confirmation and valuation of the asset, which require human presence, being the last step.
“We are now digitising asset finance which is supported by log books, SME and corporate loans that are supported by titles. We will process the loan and then invite the customer to come and close it by providing the security,” said James Mwangi, the group chief executive.
Currently, the bank uses its mobile channel, Equitel, to disburse non-secured loans of up to Sh3 million. Mr Mwangi said the non-secured loans constitute 68 per cent of the loan book.
The bank’s management argues that approval of a loan is based on cash flow, which can be analysed automatically to tell if a person qualifies for a loan.
The digitisation comes at a time when mobile banking has become a key competition ground for banks as most of them partner with M-Pesa.
Eighty four per cent of loans disbursed by the bank are processed through the mobile platform with an average of 300,000 loans issued through Equitel each month.
A total of 5.3 million loans valued at Sh30 billion had been issued though the platform as at the end of September since its launch a year earlier.
Of the amount issued, Sh6 billion is outstanding with the platform having a default rate of less than two per cent compared to the branch ratio and industry’s five per cent.
Management said the bank receives between 20,000 and 50,000 mobile loan applications daily, of which between 37 per cent and 41 per cent are approved. The applications spike during weekends to between 70,000 and 120,000 when the branches are closed.
Equitel also allows the transfer of cash with 150.8 million transactions in the year to September, nearly 10 times the number processed by bank tellers.
Equitel has 2.5 million subscribers with 94 per cent having linked the sim card to their branch accounts. The bank said the platform controls 15 per cent of the mobile money transfer market, which moved Sh956 billion in the first half of the year.
Uptake of the mobile platform and agency banking has seen the bank declare it will not be opening any more branches and will halt installation of ATMs.
The number of transactions processed in branches and through ATMs has been declining as the number of Equitel users grows.
Equity Bank hopes creation of an electric land and log book registry will enable it to fully complete the asset-backed financing digitally.
Banks are currently able to open deposit accounts for customers using mobile phones as they are able to confirm their identity number and passport using the electronic persons register.