Related Articles
Top Stories
May 22 2012 12:20
Power utility Eskom is concerned about meeting peak power demand as winter sets in although the situation should improve by mid-June, says CEO Brian Dames.
May 21 2012 17:30
Mark Zuckerberg's fortune dwindled by nearly $2bn to $18.7bn within minutes as trading began again in Facebook shares – which promptly plunged by nearly $5.
May 23 2012 08:10
Several parties, including government, have launched a Constitutional Court appeal against an interdict temporarily halting the e-toll project, Outa says.
Johannesburg - The battle to provide loans to the lower end of the market took an interesting turn last week with First National Bank releasing a report that suggests that Capitec Bank may not be the country's cheapest bank.
FNB is of the view that the small Stellenbosch-based lender is charging interest rates on its loan products that hit the wallets of its customers hard.
FNB's research found that Capitec was charging interest rates of between 78% and 258% on loans ranging from R1 000 to R10 000. These rates are much higher than FNB?s interest rates of between 39% and 196% in the R1 000 to R10 000 loan market. This loan range is Capitec's core market.
FNB said it had done a comparative study between its 12-month loan worth R5 000 and a similar Capitec product, and found out that its loan was R804 cheaper than that of Capitec. Loans below R5 000 were also cheaper compared to those of Capitec.
FNB chief executive Michael Jordaan said FNB loans came up least expensive in spite of the fact that Capitec was not charging its customers administration fees and insurance.
"The difference between them and us is that they don't have an administration fee and insurance, but their interest rate is twice our interest rate and as a result their interest payable is very high."
FNB secured the information by sending its staff in May and June to take up loans with Capitec.
Bank charges have come under the microscope in recent times. The competition authorities want to establish if the charges levied by banks correspond to the costs of providing the service.
Besides its low bank fees, Capitec is also paying better interest rates on deposits than what the market is offering.
Jordaan said he believed that Capitec was able to charge low fees and pay high deposit rates because it was cross-subsidising the two out of the interest revenue it was generating from charging high interest rates.
Carl Fischer, Capitec's chief executive of marketing and corporate affairs, said the lender was reducing the cost of its loans and its fees were the lowest in the market.
"Our net loan cost is going to be lower than what they are quoting here," said Fischer.
"This sounds like an attack on us. We are driving the fees down and customers are flocking to us. Customers are doing this because they feel we are offering an attractive banking package," he added.