Financial Sector Review: Cost Of Borrowing

In Kenya, the most common on platform lenders are Mshwari (NCBA Bank), KCB M-PESA KCB Bank), Eazzy Loan (Equity Bank) and FULIZA (NCBA Bank). These four credit facilities are very available to mobile phone users with fair to good credit ratings.

In my analysis, each of these four lending platforms has been has been packaged uniquely. Mshwari and KCB MPESA have the closest resemblance as both have set their monthly interest rate at 7.5% which is payable in 30 days. This implies that a loan of Kes.1,000 on Mshwari or KCB M-PESA will accrue an interest of Kes.75 within a month.

Eazzy loan on the other hand will charge an interest rate of Kes.10.83 (1.83%) on the same loan of Kes.1,000. However, the cost of credit on Eazzy app is exclusive of 1% (Kes.10) excise duty and a loan appraisal fee of Kes.50 (5%). This totals the cost of a Kes.1,000 bob on Equity Bank’s Eazzy loan to Kes.70.83.

Therefore it is Kes.4.17 (0.417%) cheaper to borrow Kes.1,000 from Eazzy app than from Mshwari and KCB M-PESA. On the other hand, FULIZA, an overdraft facility by NCBA Bank is the most costly of the four. A borrower is charged a daily rate of 1.033% interest which is equal to a per annum rate of 395.2%. To scale the uptake of FULIZA, NCBA Bank does not give Mshwari loans to borrowers requesting less than Kes.2,000. These on platform lenders charge a high interest rate (way above CBK rate) with the argument that these loans are unsecured (lack collateral).

Review by Patrick Okinda

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