This archive report was first published on 5 August 2019.
Published on August 5, 2019, Kenya Commercial Bank (KCB) has increased the interest rate on its mobile loan product, KCB M-Pesa, to 7.5 per cent from 4.08 per cent.
Users of the platform, mostly businesspeople, were shocked to learn of the new charges, which will significantly increase the amount they pay back.
Under the current terms, a borrower who takes out a Sh40,000 loan will pay back Sh43,001.60, with Sh3,001.60 as interest.
Some users have expressed concern that the new charges indicate KCB Group has not yet started using a digitised credit scoring method to gauge creditworthiness of its customers.
On Twitter, @beltinah sasi questioned the increase, asking if it applied to all users or just her, and how KCB could justify the new rate without considering safe borrowers who repay on time.
KCB Group responded, stating that the rate had been increased for all users, but did not provide further details.
Mobile loans are a popular innovation offered by banks, saccos, and loans-only based lenders such as Tala, Branch, and M-shwari.
Other mobile lenders, such as CBA's Mshwari and Barclays' Timiza, charge interest rates of 7.5 per cent and 6.17 per cent, respectively.
