Co-operative Bank has announced a reduction in its lending rates, just days after the Central Bank of Kenya (CBK) adjusted its base lending rate.
In a statement released on Monday, February 10, the bank confirmed that its base lending rate had been cut from 16.5 percent to 14.5 percent per annum.
“Co-op Bank Group is pleased to announce a significant 2% reduction in our Base Lending Rate from 16.5% p.a. to 14.5% p.a.,” the statement read.
The bank stated that the revised rates take effect immediately and will be applied alongside a margin ranging between 0% and 4% per annum, depending on individual credit profiles.
“This reduction takes effect immediately. The effective lending rate will be the Base Lending Rate of 14.5% p.a. plus a margin of between 0% to 4% p.a., based on the customer’s credit profile,” the statement added.
The bank explained that the move is aimed at stimulating credit growth across key economic sectors, particularly for Micro, Small, and Medium Enterprises (MSMEs). These businesses play a crucial role in economic expansion and job creation.
The decision follows the Monetary Policy Committee (MPC) meeting held on February 5, where CBK lowered its base lending rate from 11.25% to 10.75%. Additionally, the Cash Reserve Ratio (CRR) was reduced from 4.25% to 3.25% to provide banks with more liquidity, encouraging further lending.
CBK Governor Kamau Thugge emphasized that these adjustments are designed to ensure financial institutions pass on the benefits of lower borrowing costs to their customers.
“With these measures, banks are expected to lower their lending rates further, stimulate credit growth in the private sector, and support overall economic activity,” Dr. Thugge stated.
He also confirmed that CBK has begun on-site inspections to ensure banks comply with the Risk-Based Credit Pricing Model (RBCPM) and enforce interest rate reductions. Under the amended Banking Act, institutions failing to pass on the benefits of reduced funding costs to borrowers will face penalties.
Ahead of the CBK meeting, the Kenya Bankers Association (KBA) had urged for even deeper cuts to interest rates. In research published on January 29, KBA argued that lowering the Central Bank Rate (CBR) further would encourage borrowing and boost economic activity amid challenging financial conditions.
With the latest rate adjustments, all eyes are now on commercial banks to see how they implement these changes and make credit more affordable for businesses and individuals.
