Kenya’s largest bank has reduced its lending rate from 15.6% to 14.6%, effective February 10, 2025. This decision came after pressure from the Central Bank of Kenya (CBK) to lower rates in response to cuts in the benchmark rate.
The bank mentioned that the final lending rate will be determined by a customer-specific margin adjusted to the base rate according to the approved Risk-Based Credit Pricing Model. This adjustment applies to all existing and new facilities denominated in the local currency, excluding fixed-rate credit facilities.
The CBK has been firm with banks reluctant to pass on the benefits of reduced borrowing costs to customers. Governor Kamau Thugge mentioned that the regulator has started physical inspections of banks to ensure compliance and enforce penalties on those not reducing rates.
During the recent monetary policy meeting, the CBK lowered the benchmark lending rate and cash reserve ratio, injecting funds into the economy. Despite concerns from banks about high fixed deposit costs, this intervention aims to boost lending, aid economic recovery, and enhance access to affordable credit.
By aligning with this objective, the bank’s rate reduction could lead other lenders to follow suit. This initiative comes as private sector credit dropped to a 22-year low, attributed to expensive loans.