NAIROBI, Kenya, Jan 11 – Customers will have to pay more to access loan facilities after banks increased lending rates.
A spot-check by Capital Business revealed that Equity Bank, Standard Chartered Bank Kenya Limited, among others, have increased interest rates on mortgages and overdraft facilities.
Equity Bank, for instance, informed its customers that it will increase its lending rates on overdrafts and mortgages from 13 percent per annum to 18 pc.
It came after the lender got an approval from the Central Bank of Kenya (CBK) to implement risk-based pricing.
“We refer to your existing loan facilities with the bank. This letter is to notify you of changes in interest rates on your outstanding facilities effective 30 days from the date of this letter,” the Bank said in a notice to a customer.
In September last year, CBK approved 38 commercial banks to roll out the risk-based pricing.
High lending rates allow banks to issue loans to riskier customers, helping cover losses in case of a default.
It also incentivizes banks to issue more loans to clients as it reduces the risk.
“Equity Bank (K) LTD received an approval from CBK to implement risk-based pricing when lending to customers,” the statement added.
“The new pricing model applies a Reference Rate (in this case Equity Bank Reference Rate, currently at 12.52%) plus a Margin (currently a maximum of 8.5 per cent) per annum.”
Standard Chartered has also increased its internal lending rate from 8.50 percent to 9.25 percent.
