Chibuyu Finance Limited has been found to be the most expensive lender of loan facilities among the 33 non-bank financial institutions with a total effective annual interest rate of 262 per cent.
According to a publication of charges, fees and commissions compiled and published by the Bank of Zambia (BoZ) as at June 30, 2018, Chibuyu is the most expensive lender of credit charging consumers an annual interest rate of 262 per cent among the 25 micro-financing companies, and total 33 non-bank financial institutions.
BoZ data reveals in a demonstration of the cost of borrowing K1,000 for one year across all 33 entities, Chibuyu ranked the most expensive lender with a total cost of borrowing amounting to K2,400 in interest for a small loan of K1,000.
‘YesCash’ Zambia Limited ranks in second place with their interest rate at 214 per cent, with clients charged K761.20 for the same loan amount of K1,000, while Moneta Finance Limited’s interest rate peaks at 120 per cent for the same loan amount placing the company as the third highest micro-lender. In addition to the interest cost of K717.57 for the loan amount of K1,000, Moneta charges its clients a K20.00 administration fee.
On the cheaper end of the scale, Zampost Microfinance offers the cheapest loans of K1,000, with their interest rate pegged at 28.16 per cent, making the company the cheapest lender among the 25 micro-lending institutions, and third cheapest out of the total 33 non-bank financial institutions behind the Zambia National Building Society (ZNBS), the mortgage lender, and Focus Financial Services Limited, one of three lease finance institutions.
Other microfinance companies lending K1,000 below 100 per cent include: Betternow Finance Company, whose interest rate was pegged at 77.9 per cent; Bayport at 44.52 per cent; Izwe Loans at 40.89 per cent and Meanwood Finance at 69 per cent, among others.
Among the country’s two leading building societies, ZNBS charges customers an effective annual interest rate for a K1,000 loan at 21.40 per cent compared to Finance Building Society’s 36.58 per cent for the same amount.
And between the Development Bank of Zambia (DBZ) and Natsave, the latter was found to more than double its interest rate for a K1,000 loan at 67 per cent compared to the former’s 30.6 per cent.
According to the BoZ, the difference in the effective annual interest rate on loans obtained from different financial service providers arises from factors such as differences in the frequency of compounding interest, differences in the effective loan periods and differences in the average principal amounts outstanding during the effective loan periods.