Kenya Commercial Bank has quietly suspended lending via the popular KCB M-Pesa mobile banking platform prompting fears of credit rationing for small-scale borrowers in the wake of new rate capping law.
The move, which caught many off guard, has raised concern among the more than six million account holders signed up on the platform. Only those with outstanding loans can access the service to enable them repay loans. New loan issuance has been disabled on the platform, accessed through shortcode *844#.
The law capping rates - Banking (Amendment) Act 2016 - became effective a fortnight ago. It capped commercial interest rates at 400 basis points above the Central Bank’s benchmark rate, which currently stands at 10 per cent.
At the current rate, a borrower should get a loan at a maximum interest rate of 14 per cent. However, there is an ongoing debate on whether the law encompasses mobile loans or credit disbursed by saccos.
“Loans on KCB M-Pesa have been put on hold for now,” a KCB customer care agent said.
The bank's communication department did not, however, respond to our request for comment.
For many account holders, KCB M-Pesa loans have been unavailable since August 10, when KCB did a system upgrade. This was 12 days prior to President Uhuru Kenyatta assenting to the new banking law.
The lender had sent short text messages, warning customers that they will not be able to access loans during the upgrade.
“What we know is that KCB stopped giving mobile loans after the banking law came into effect. We see this as a means of sabotaging the new banking law in the hope that the rate caps will be amended,” Consumer Federation of Kenya secretary general Stephen Mutoro said.
KCB M-Pesa, a joint initiative of KCB and Safaricom, is among the most popular and largest savings and micro credit platforms. Other mobile loans offered by other firms are, however, still available. These include M-Shwari operated by Commercial Bank of Africa and Safaricom, and Eazzy 247 by Equity Bank.
Two weeks ago, Equity Bank reduced interest rates on loans offered through Eazzy to 14 per cent, making it the first lender to take the step. CEO James Mwangi said Equity had also set aside Sh100 billion for onward lending to the mass market.
CBA on its part said fees on M-Shwari would remain unchanged at 7.5 per cent.