Isuzu Targets SMEs with 13% Loans Interest Rate Deal with NCBA

Local vehicle assembler Isuzu East Africa has signed a deal with tier one bank NCBA to maintain the interest rate on loans for their vehicle customers at 13%, despite the removal of the interest rate ceiling in late 2019, maintaining the assembler’s vehicle financing strategy that has seen it target banks that make it possible for customers to acquire trucks in structured deals.

The deal signed with NCBA will afford customers the opportunity to enjoy loan tenors of up to 5 years as well as up to 95% financing for the purchase of new vehicles and a 60-day repayment grace period from the onset on their choice of Isuzu vehicles.

About 90% of Isuzu East Africa’s sales is in the commercial vehicle segment with the bulk of clients coming from Small & Medium Enterprises (SMEs), who borrow from banks to finance their purchases.

Speaking at the signing ceremony, Charles Kariuki, Director Finance & Strategy at Isuzu East Africa assured Isuzu SME customers that they’ll continue to enjoy the 13% rate from the bank, which was formed after the recent merger of NIC and CBA banks.

“Although the business environment is very dynamic, our customers seek predictability when it comes to their monthly obligations. This segment is very sensitive to the cost of credit which means a change in interest rates can affect their cash flows and monthly loan repayments,” said Kariuki.

The removal of the rate cap late last year has caused uncertainty in the market as customers wait to see what action the banks will take. The general expectation has been that the banks will increase interest rates.

NCBA Group Director of Asset Finance and Business Solutions, Alan Dodd said the partnership with Isuzu represents another step forward in ensuring SME customers have available and competitive financing.

“This deal builds on our extremely successful partnership with Isuzu dating back to the 1950’s. It gives customers a raft of mitigation measures on their repayment plans by providing additional business support in case of a disruption to their business.” said Mr Dodd.

He further stated that the move to offer customers access to affordable credit will stimulate business growth and subsequently create jobs.

According to Dodd, the deal with Isuzu represents another step forward in ensuring its dealers and customers have available and competitive financing.

“This campaign builds on our extremely successful partnership with Isuzu dating back many years. It gives customers a raft of mitigating reasons why they should buy Isuzu products with NCBA financing, including insurance cover ” said Mr. Dodd.

In 2016, the government capped interest rates on loans at 14% in a move intended to make credit available to SMEs. Although the fixed rate created certainty on costs associated with getting loans, banks were more stringent in their assessment of suitable clients.

The control was eventually lifted in 2019 with the Central Bank of Kenya advising banks to be reasonable in revising interest rates.

Charles Kariuki, Isuzu EA Director Finance & Strategy, further explained that the latest deal with the NCBA would assist SME customers to access after-sales services offered by a network of Isuzu dealer service centres across the country.

“We recognize that our customers would like to purchase vehicles but do not know how the loans market will react. This deal with NCBA will ensure our customers continue to enjoy our dependable vehicles and service their businesses without fear,” said Kariuki.

Bank Strategy

Isuzu has been engaging banks in a bid to make it easier for buyers to acquire their vehicles through structured deals.

Businessmen are known to prefer structured payments on assets making such deals an exciting proposition.

In January last year, Isuzu inked a deal with Co-operative Bank that allows the lender’s customers access to 95 percent financing when purchasing commercial vehicles from the auto-dealer.

In May, the vehicle assembler signed a deal with Gulf African Bank that allows the bank’s customers to enjoy up to 95 percent Shariah-compliant structured financing on all Isuzu models including Isuzu D-max, N series trucks and F series trucks.

Before the merger between NIC and CBA, Isuzu had also closed a deal with NIC that made it possible for Isuzu customers get up to 95% financing for the purchase of new vehicles, a 60-day grace period from the onset and a loan payment period of up to 5-years.  

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