Cheapest Loans in Kenya: With the introduction of the 20% excise duty on “fees or commissions” earned by financial institutions on a loan, lenders scrambled to review the cost of their loans to comply with the law.
Overall, the cost of credit across banks, microfinance institutions, and digital lenders has increased courtesy of the new duty.
The Parliamentary Finance and Planning Committee in rejecting the plea from bankers to exclude fees and commissions from excise duty said the decision was guided by the government’s policy to reduce tax incentives.
However, as the TheCounties.Info team has found, the formulae the lenders used led to disparate outcomes in percentage changes in the cost of credit. And we have analyzed some cheapest loans in Kenya
The total cost of a Vooma loan increased from 5.91% to 6.91%, a one percentage point increase making it the cheapest 30-day loan despite the increased cost.
2. Timiza loan
Absa Kenya’s Timiza loan increased from 6.08% to 7.15% after the excise duty was factored in making it the second-cheapest 30-day loan in the market.
3. KCB M-Pesa
KCB M-Pesa comes in third with the total cost of its 30-day loans increasing from 7.35% to 8.64%.
Safaricom’s M-Shwari ranks the fourth cheapest at 9% in total loan cost, up from 7.5% before the introduction of the excise duty on fees and commissions.
Lenders across the sector have increased the total cost of their loans in varying proportions in reaction to the introduction of the duty.