Customers will not get refunds from Commercial Bank of Africa’s Mshwari for charging up to 7.5 percent on loans.
When calculated annually, the rate would be as high as 90 percent which would be astronomical as compared to the 13.5 percent currently recommended by the Central bank of Kenya.
The courts ruled against a suit by Consumer Federation of Kenya (Cofek) who had sued the CBK and CBA for what it terms as non-compliance with the lending rates on Mshwari service asking CBA to pay back the extra charges.
The mobile product owned by President Uhuru Kenyatta owned family bank had argued that its facilitation fees are one-off and that the loans only last a month.
In comparison with a similar product, KCB Mpesa charges an interest rates of 1.16 percent which annualized is equivalent to 13.92 percent. To cushion against the losses KCB charges an additional facilitation fee of 2.5 per cent.
Barclays recently introduced Timiza loan charges interest rates of 1.17 percent monthly and one-off facilitation fee of 5 percent.
Equity mobile loans known as Equitel Eazy loans charge an annual figure and not a monthly figure for the interest rate currently at 14 percent.
But like its peers, it has slotted in a 5 percent facilitation fee and 10 percent of this facilitation fees as the excise.
This underscores the research by CBK that banks have booked in new charges to hide extra costs that have helped them defend their margins under the rate cap year of 2017.