13,500 Kenyan SMEs to Benefit from Pilot Mobile Lending App – CBK

About 13,500 SMEs in Kenya will benefit from a new mobile lending application being introduced by five commercial banks.

The aim is to enable small businesses gain access to credit through to the country’s small and medium-sized businesses, the Central Bank of Kenya (CBK) said on Monday.

Under the new pilot SME lending service, Cooperative Bank of Kenya, Diamond Trust Bank, KCB Bank Kenya, NIC Group and Commercial Bank of Africa Limited (CBA) will target 3,500 businesses for the first phase.

They will be offered unsecured loans of between 30,000 ($297) and 250,000 Kenyan Shillings with a refund period of 1 to 12 months which will draw an interest rate of 9% per annum, the central bank explained in a statement.

“Customers will be scored and advised of their credit limit. Additionally, they are eligible for a top-up functionality once 80 percent of the loan borrowed has been repaid or track record of three months’ repayment,” it added.

Another 10,000 businesses will be enrolled for the second phase of testing.

Private sector credit growth has been sluggish since the government capped commercial lending rates at four percentage points above the central bank rate in September 2016, after lawmakers said they were concerned about high rates.

But this has led to a private credit squeeze, with banks saying the move forced them to cut back on loans to high-risk groups. And pressure on banks to use mobile channels to cut costs has increased since the government capped rates, crimping their profit margins.

Kenyan lenders have also been turning to technology in response to competition from mobile phone-based services such as Safaricom’s M-Pesa. Safaricom says default rates on its platform are in the single digits.

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