Equity Bank is putting on hold the Eazzy Plus Loans. Eazzy Plus Loan was attractive due to the fact that consumers could apply for loans payable in two months to one year. The lender will now focus on issuing mobile based loans whose repayment period is much shorter. More precisely, Equity bank will focus on offering one month advances. This new product will go by the name Eazzy Loans.
Under Eazzy Loans, Equity Bank customers with Equitel lines will only be able to receive a fraction of the amount they would have received under the Eazzy Plus Loan product. This is besides the fact that the repayment period has been reduced from one year to one month.
The fate of the famous Eazzy Plus Loan is not quite clear. Judging by the company’s Twitter handle, the Eazzy Plus Loan could be under review. It might resurface later on but with updated Terms and Conditions. Probably it won’t be the same product that we all knew.
Equity Bank is probably taking this measure as a result of the capping of lending rates that was introduced back in September 2016. Banks do not now factor in the risk aspect when they are giving an interest rate quote as was the case before. Banks used to charge a higher interest rate to loans that they considered to be riskier. But now that is all in the past. As such, the banks tend to shy aware from issuing long term loans in favour of one month loans. This move has dire consequences. Banks will thus experience slow loan book growth.
Just as a recap, the Central Bank of Kenya (CBK) has set the ceiling that Banks can charge on lending rates at four percentage points above the Central Bank Rate. The CBR is currently at 10 percent which means that banks can charge up to a maximum of 14 percent as interest rate on loans.
On the other hand, the floor for deposit rates should be set at 70 percent of the CBR. Thus currently the minimum interest rate that an interest baring account should receive is seven percent.