Equity Bank Kenya has entered the financial landscape with a strategic launch – ‘Boostika.’ This unsecured overdraft facility is poised to directly challenge Safaricom’s Fuliza, offering customers the ability to overdraw their accounts up to Sh100,000 for seamless transactions, particularly in shopping scenarios.
Boostika, boasting an effective cost of credit at 8.5%, is designed to provide a practical alternative to Fuliza. Eligibility is extended to customers with accounts active for a minimum of six months, granting access to overdrafts ranging from Sh100 to Sh100,000 based on individual loan limits. The added flexibility of multiple overdrafts, within the approved limits, enhances its appeal.
Integrated into the transaction journey, Boostika ensures a smooth experience for users encountering insufficient funds during payments, fund transfers, or airtime purchases.
Breaking down the costs, Equity imposes a five percent processing fee, a 1.5 percent monthly interest rate, a one percent loan insurance charge, and a 20 percent excise duty on the processing fee. For example, a Sh100,000 overdraft would incur a total cost of Sh8,500, covering processing fees, interest, loan insurance, and excise duty.
In a comparative analysis, repaying a Sh70,000 Boostika overdraft after 30 days would cost Sh5,950, while a similar amount through Fuliza would cost an M-Pesa user Sh1,600, encompassing access fees, daily maintenance charges, and excise duties.
With an effective interest rate of 2.3 percent per month on Fuliza overdrafts, Boostika appears 3.7 times more expensive for customers.
Accessible through Equitel, Equity Mobile App, or the *247# option, Boostika strategically targets the substantial user base on these platforms. Equity commits to periodic reviews of individual overdraft limits based on account behavior, transactions, and loan repayment history.
Equity Group data highlights Equitel’s impressive performance, facilitating 27.5 million transactions valued at Sh1.192 trillion in the nine months ending September last year. Simultaneously, the Equity Mobile application recorded 161.6 million transactions worth Sh1.355 trillion during the same period.
Repayment of Boostika involves an auto-sweep from the borrower’s operative account. Customers also retain the option to prepay or clear the amount in full, using the same platforms used for borrowing. This strategic move positions Equity as a formidable player in the financial sector, offering a competitive alternative and addressing the evolving demands for accessible and convenient financial solutions in the market.
By: Montel Kamau
Serrari Financial Analyst
16th January, 2024
