Wednesday, August 02, 2006

Equity Bank's business model: An inovation or a risk

Some of the more controversial business models of equity bank:
Clearing cheques:
If you a deposit a cheque today, it takes four working days before it clears for you to access the cash. At Equity, you can deposit a cheque today, and collect the cash but pay 3% of the amount as fees.

Overdrfats:
You can take an overdraft on your account, you pay flat fee of 5%. It doesnt matter if its for a month or 2 days. Eg. On 100k you pay 5000 for a day or for a month.

Approval of loans, cheques clearance and overdrafts
In other banks, there are clear and rigid requirements to get a loan. viz proof of employment, 6 months bank statements etc. At Equity no need. Just present yourself to the bank manager and he looks at your account and tells you if you qualify, the amount possible for lending and the terms.

Decision on Interest rates chargable
On most banks, the rates are fixed at the head office for each category of clients. At Equity, its decided per loanee by the bank manager!!



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37 Comments:

Blogger coldtusker said...

They are VERY innovative! I like that!

Very smart on fee for early clearing! Sometimes better 2pay 3% & get cash for other deals!

I did not understand the overdraft fee. Please explain with details & examples. If I "borrow" 10,000 I pay 5% (loan fee?) but do I pay interest for the days i.e. is the 5% for 1 month, 2 months, 1 year? Is there a maximum time limit?

I like the loan approval process! Only problem is what if the manager is corrupt i.e. lower interest charge to "friends", family, etc?

Also loan quality can suffer if manager "favours" his family & friends over credit checks or collateral.

Equity will really shake up the market!

4:41 PM  
Blogger bankelele said...

also 100/= to clear a cheque is preety steep

5:08 AM  
Blogger coldtusker said...

No answers to my questions????

7:29 PM  
Blogger gathinga said...

cold: sory abt late answers

if you borrow 10k as O/D, you pay a 5% upfront as 'fee'. You can take this for up to 12 months. The interest will be decided by the branch manager and will be in the range of 24% pa


With respect to the objectivity of the manager vis favouring friends,m girlfriends or family.... i dont know if there are checks in place.

these guys are pretty smart

3:11 PM  
Blogger coldtusker said...

24%???? These guys are up there with the usury... Imagine BBK charging 24% + 5% & the government & idiotic MPs will start calling BBK names while bringing in "controls"

BUT if you want to borrow... well... pay or don't borrow!

Smart guys but I see problems with defaults if the manager lends willy nilly...

5:03 PM  
Anonymous Anonymous said...

What is you e-mail address?

Are you still buying Uchumi shares?

4:01 PM  
Blogger gathinga said...

anon:
alphasports_1@yahoo.com
am still buying uchumi
mail me!!

5:10 PM  
Anonymous Anonymous said...

About buying Uchumi - kwani there's OTC market for these shares? At what rate?

4:52 AM  
Blogger pesa tu said...

Its a good model for people who need access to capital quickly(informal traders).
The only danger is that bad loans can swamp u quick if u dont have a good risk measuring system.
Other banks do the same thing but only for high net worth clients.
Did u jnow u don't need security to get a Bank Loan. Only proof of capacity to repay.

Relevant blog keep it up.

7:35 AM  
Blogger gathinga said...

anon@arrangements can be made before some lawyer reagrding uchumi shares transfer.

pesa tu@thanks. its only recent that banks have come down to offer loans without security... after the interest rates on govt securities crumbled, otherwise it was a nightmare.

3:43 PM  
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