Stanbic disburses Sh1bn in risk-based loans
The CFC Stanbic Bank branch along Kimathi Street in Nairobi.
Stanbic Bank disbursed at least Sh1 billion in loans priced based on the risk profile of customers between October and December 2022, after the Central Bank of Kenya(CBK) granted it a nod to implement the model at the start of the fourth quarter.
The bank’s chief financial and value officer, Dennis Musau however said that the bank has currently limited risk-based lending to loans disbursed through its digital channel.
“We’ve implemented risk-based pricing on our digital lending especially for retail customers because it is much easier and faster with the systems and the in-built algorithms when it comes to assessing certain metrics. Intuitive lending, which is manual lending, takes a little bit of time and we are working through how to implement it” he told Nation in an interview.
This means that in the full year ended December 2022, risk-based lending in the fourth quarter of the year accounted for 2.7 percent of the total Sh36.7 billion worth of digital loans disbursed by the bank. In 2022, 93.0 percent of all transactions by the bank took place on digital channels.
Banks are transitioning back to the risk-based lending framework following the adoption of a cap on interest rates which lasted between September 2016 and November 2019. For three years, commercial banks were forbidden from charging interest above four percent of the CBK's benchmark rate.
Stanbic Bank’s loan book closed in 2022 at Sh 236 billion, having grown by 27.5 percent year-on-year. In the full year ended December 2022, Stanbic’s net earnings grew by 28.6 percent to Sh 9.1 billion.
“The formula we structured and was approved by the Central Bank of Kenya provides that everything is in one bucket including fees and we just disclose and charge that to the customer. Remember the complaint from customers was largely around transparency, so banks would for instance say the interest is 10 percent yet on the side charge fees”, Musau said.
