Equity Group Holdings, a leading financial services conglomerate based in Nairobi and headed by Kenyan businessman James Mwangi, has announced an increase in loan prices following the new benchmark rate set by the Central Bank of Kenya (CBK).
The adjustment comes as a result of the recent increase in the Central Bank Rate (CBR) from 9.5 percent to 10.5 percent, the highest level in nearly seven years. This makes Equity Group the first lender to adjust its lending rate in accordance with the new rate.
As a result, Equity Group’s customers will experience an increase in their loan servicing costs as the lending rate is adjusted to 14.69 percent from the previous 12.5 percent earlier this year.
The latest development comes after Equity Group implemented a risk-based pricing mechanism seven months ago to enhance credit access for small businesses and individuals who faced difficulties obtaining formal credit.
According to this model, the bank can add a premium to cover lending to customers considered risky. The interest rate for each customer is determined using the Equity Bank Reference Rate (EBRR) plus a margin based on their risk profile.
As a result of the new adjustments, customers’ loans will now be priced at 14.69 percent plus a margin determined by their individual risk profiles. This means some customers may see their total interest rate rise above the maximum of 21 percent announced in January.
Equity Group operates not only in Kenya but also in Uganda, Tanzania, South Sudan, Rwanda, and the Democratic Republic of the Congo through its subsidiaries.
Under the leadership of Mwangi, the group has played a significant role in the growth and transformation of Kenya’s financial services industry. Mwangi himself owns a substantial 3.38-percent stake in Equity Group, positioning him as one of the country’s wealthiest investors.
Equity Group showcased strong financial resilience in the first quarter of 2023, with profits exceeding $90 million. This growth was driven by a 57-percent surge in the group’s nonfunded income, which rose from Ksh11.5 billion ($83.7 million) to Ksh18 billion ($131 million).
