Kenya Commercial Bank has revised its M-Pesa loan interest rates, an indication that users of mobile money platforms will not escape the rising cost of borrowing.
“Dear customer, effective October 26, 2015 (today), new loans on KCB M-Pesa will attract monthly loan interest of six per cent for one month, five per cent for three months and four per cent for six months,” KCB notified customers in a text message on Saturday.
The bank had been charging interest of four, nine and 12 per cent for one, three and six-month repayment periods, respectively, since the launch of the mobile banking product in February. The review means the bank has increased the cost of shortterm loans and reduced the rate for long-term borrowing.
KCB M-Pesa is a product of KCB Group in partnership with telecommunication giant, Safaricom. The KCB M-Pesa account allows customers on an M-Pesa platform to save and borrow up to Sh1 million instantly on their mobile phones based on their credit score.
M-Pesa customers have also been getting instant loans from M-Shwari, another popular mobile banking product, which was launched in 2012 by Commercial Bank of Africa and Safaricom. M-Shwari interest rates have not been reviewed. The interest rate hike started in July when the Central Bank’s Monetary Policy Committee increased the bank rate from 10 to 11.5 per cent and the Kenya Bank’s Reference Rate from 8.54 to 9.87 per cent, in a bid to tame the weakening of the shilling and enhance stability of commodity prices.
Barclays was the first bank to react to the Central Bank’s announcement by hiking its interest rates from 16.19 per cent in July to 23.5 per cent in October. Over the same period, Standard Chartered has also raised interest rates from 19.4 to 27 per cent, Cooperative Bank from 19.3 to 24 per cent, National Bank from 14.7 to 19.3 per cent and Housing Finance from 19 to 21 per cent.
The government has been accused of fueling the interest rate hike by giving banks attractive rates on Treasury bills, as it seeks to end the financial crisis that has threatened the implementation of the 2015/2016 budget. The Central Bank’s weekly statistical bulletin published on Friday shows the average interest rate for the 91-days T-Bills rose from 13.9 per cent in September to 22.5 per cent in October.