Equity Bank Kenya Reduces the Rate of Interest on Credit Facilities to 14.5% Per Annum

Equity Bank has adjusted interest rates to 14.5% per annum being the current base rate set and published by the Central Bank of Kenya vide Banking Circular No 4 of 2016 dated 13th September 2016 of 10.5% per annum.

At the same time, interest on deposits held in local currency interest earning accounts will earn interest at a minimum of 7.35% being 70% of the current base rate as set by CBK at 10.5% per annum.

“As a law abiding institution, Equity Bank has adopted the base rate as set and published by CBK currently at 10.5% and marking up with a 4% cap as provided for by the Law to arrive at 14.5%. The new interest rate will be applied on a reducing balance basis. It will apply to all local currency new credit facilities and existing ones whose performance is on schedule.  We invite our customers to visit their respective branches in case they require more information or clarification on their credit facilities.” Said Dr. Mwangi.

The Banking (Amendment) Act 2016  section 33(1) (a) says “ the maximum interest rate chargeable for a  credit facility in Kenya at no more than four percent, the base rate set and published by the Central Bank of Kenya….”

Equity Bank has interpreted “credit facility” to mean any form of financial accommodation extended to a customer through institutions licensed by the Central Bank under the Banking Act irrespective of the various channels. The desire to provide ceilings is a clearly discernible intent of the law as evidenced by the Memorandum of Objects and Reasons to The Banking Act (Amendment) Bill, 2015.  The Act further prohibits any person from entering into an agreement/arrangement to borrow or lend directly or indirectly at an interest not accordance thereof.

Equity Bank has interpreted this to include all credit facilities extended to customers by such institutions. This includes loans through mobile phones or through other third party platforms or collaborations with Mobile Network Operators (MNOs), credit card facilities as well as micro finance loans.

The Act in section 33(B) (2) further says “A person shall not enter into an agreement to borrow or lend directly or indirectly at an interest rate in excess of that prescribed by law”.  The fact that this prohibition extends to all categories of persons including lenders and borrowers clearly makes out a case for wide interpretation.

“Our suite of deposit accounts will now attract a minimum interest rate of 7.35%p.a. We invite our customers to make full use of these products to build their savings and investments. Our Eazzy account is designed to make banking easy. It has no minimum operating balance, no ledger fees, no maintenance fee, no monthly charges and no cash deposit or cheque handling charges. Our Junior Member Account, Teen Member Account and Achievers Student Account are easy to open, have no ledger fees and have an embedded financial education benefit. Our Jijenge Account enables our customers to save for specific investment goals. It is easy to open and allows the customer to have a discipline of saving. A customer can access emergency loans of up to 90% of their savings.  Our School Fees Account is easy to open and has no account maintenance balance or monthly charges, has four free withdrawals in a year, free internal standing orders and three free bankers’ cheques in a year for school fees payment. With these products now attracting premium interest at a minimum of 7.35%p.a, it gives Kenyans the opportunity to build savings.”  Said Dr. Mwangi.

Equity Bank has said it will further continue to support its customers with Financial Education and Entrepreneurship training as well as with products and solutions such as Insurance that will enhance the protection of their assets.

“We commit to continue partnering with our customers to avail even more innovative products and services that make banking easy and convenient. We remain committed to our customers and wish to assure them that we shall strive to remain as accessible as we have always been in offering them products and services that meet their financial needs and aspirations.” Added Dr. Mwangi.

Equity Bank is the largest bank in Kenya in terms of customer base with over 10 million customers. The bank has been a leader in innovation and has played a key role in deepening financial inclusion from 4% in 1994 to the current 75% by removing barriers such as minimum balances, ledger fees and conventional collateral that made access to loans a preserve of a few. Further, the bank has continued to innovate and inspire the industry around delivery channels such as agency banking and mobile banking to broaden access and deepen inclusion.

Equity Bank Kenya has strategically and uniquely differentiated itself by disrupting its business model, re-imagining the distribution channels, digitization, re-positioning the balance sheet and massive social impact investment in the Equity brand .Convergence of products and services on Omni channels has delivered unparalleled convenience and ease of banking. This will also assist the bank to deliver its long term goals of maximizing shareholder value for our investors.

“The assurance that we want to give our customers is that Equity Bank, which has walked with them for the last 3 decades will continue supporting and partnering with them in their journey of socio-economic transformation. We have partnered with farmers and seen over 600,000 peasant farmers transition to small scale commercial farming, 1.3 million youth and women have been trained on financial education, over 18,000 entrepreneurs have been trained in entrepreneurship, over 326,000 women have been lent over Kshs 33bn through Fanikisha,” said Dr. Mwangi.

Equity Bank has been involved in social investment programs in education and leadership development, agriculture, health, environment, financial inclusion and literacy, innovation and entrepreneurship. The Wings to Fly Programme which was launched in 2010, has extended comprehensive secondary school scholarships to 12,377 academically gifted children from financially challenged backgrounds. Similarly, the Equity Leaders Programme which benefits Wings to Fly Scholars who attain an ‘A’ grade in secondary school final exam as well as the top boy and girl from all the counties in Kenya has so far benefited 3,405 young people, including more than 329 scholars and alumni at global universities.