Tuesday, January 31, 2023

Equity Bank to stop giving salary loans

Equity Bank is set to stop giving out salary loans under its docket for unsecured and micro loans.

This is a move that is expected to affect salaried workers and owners of small businesses.

According to Kenya’s Business Daily, the bank says its latest move is aimed at complying with a new set of global accounting rules on loan loss covers.

The new guidelines – which are technically referred to as International Financial Reporting Standard (IFRS) 9 – are meant to come into force on January 1, 2018.

“We are moving away from unsecured lending. IFRS 9 requires you to use historical ratio to make provisions at point of booking the loan. This is not sustainable with a margin of seven per cent,” Equity CEO James Mwangi was quoted by Business Daily.

Equity has traditionally focused on micro-enterprises and low-income earners to grow volumes. Equity’s change in strategy defies the segments that helped transform the former building society into one of Kenya’s biggest lenders.

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