Chibuyu Finance remains most expensive lender – BoZ

Chibuyu Finance Limited remains Zambia’s most expensive lender of loan facilities among the 32 non-bank financial institutions with a total effective annual interest rate of 187.5 per cent.

According to a publication of charges, fees and commissions compiled and published by the Bank of Zambia (BoZ) as at March 31, 2019, Chibuyu Finance is the most expensive lender of credit charging consumers an annual interest rate of 187.5 per cent, among the 25 micro-financing companies, and out of a total of 32 non-bank financial institutions.

BoZ data reveals in a demonstration of the cost of borrowing K1,000 for one year across all 32 entities, Chibuyu still ranks as the most expensive lender, with an interest cost of K1,800, and total cost of borrowing amounting to K1,875 for a small loan of K1,000.

This compares with its annual interest rate previously pegged at 262 per cent for a small loan of K1,000 as at June 30, 2018.

Goodfellow Microfinance Limited was ranked in second place with an interest rate of 180 per cent, and total cost of borrowing amounting to K1,800 for a small loan of K1,000.

‘Xtenda’ ranks in third place with their interest rate at 141.69 per cent, with clients charged K255 as the total cost of borrowing for the same loan amount of K1,000, while Nchanga’s interest rate peaks at 114 per cent for same loan amount placing the company as the fourth highest micro-lender, while Meanwood Finance’s interest rate is slightly less at 113 per cent.

On the cheaper end of the scale, Zampost Microfinance remains the country’s cheapest lender among the 25 micro-lending institutions, with their interest rate still pegged at 28.16 per cent for a loan of K1,000, and third cheapest out of the total 32 non-bank financial institutions behind the Zambia National Building Society (ZNBS), the mortgage lender, and Development Bank of Zambia (DBZ).

Other microfinance companies lending K1,000 below 100 per cent include: Betternow Finance Company, whose interest rate was still pegged at 77.9 per cent; Bayport at 43.73 per cent; Izwe Loans at 52.25 per cent and Madison Finance Company at 64.12 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 20.15 per cent compared to Finance Building Society’s 33.59 per cent for the same amount.

And between the Development Bank of Zambia (DBZ) and Natsave, the latter was found to nearly triple its interest rate for a K1,000 loan at 72 per cent compared to the former’s 26.8 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.

The data equally reveals that lending on rates on credit facilities have demonstrably declined over the last 15 months in response the central bank’s relatively low Monetary Policy Rate (MPR), having remained unchanged at 9.75 per cent since February, 2018.

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