In January 2023, Equity Group intends to completely begin pricing loans according on the risk profiles of borrowers. Noting the recovery from pandemic shocks that had impacted family and corporate profits despite escalating inflation.
Nearly a year after receiving approval from the Central Bank of Kenya to charge credit at an interest rate of up to 18. 5 percent per year, the lender will begin using risk-based lending. To avoid upsetting the credit market, which is recuperating from the effects of Covid-19’s battering and interest rate limitations that expired on November 9, 2019, a number of top-tier banks have adopted a phased rollout of the internationally-applied loan pricing model.
The cost of borrowing will increase for most borrowers as risk-based lending becomes more widely used. However, it is anticipated to incentivise banks to lend more as the increased returns will cover the risk of default by some customers.
In light of the transition to risk-based pricing of loans, the bank said that going ahead it will reallocate investments in government debt to lending to firms and people, which promised greater returns.