Kenyan banks have announced plans to lower interest rates on loans beginning this month, a move aimed at making borrowing more affordable for customers.
In a statement issued on Sunday, December 8, the Kenya Bankers Association (KBA) confirmed that banks are implementing the reductions following successive cuts in the Central Bank Rate (CBR).
“The recent successive cuts in the Central Bank Rate have implications for both deposit and lending rates in the market. Banks are taking steps to lower interest rates and make borrowing more affordable,” said KBA Chairman John Gachora.
He added that individual banks have started issuing notices to customers about the reductions, which will be implemented progressively based on monetary policy adjustments and credit risk factors.
“Individual banks are issuing requisite notices to customers indicating reductions in loan rates from December 2024. These reductions will continue progressively in line with the evolution of monetary policy and credit risk factors,” Gachora stated.
Each bank, he noted, is mandated to assess the risk profile of its customers and adjust loan pricing accordingly, considering their approved base rates and risk premium evaluations.
“While base rates primarily reflect the Central Bank Rate and the cost of borrowing by the government, the customers’ risk premiums mirror market conditions, such as the level of non-performing loans and any challenges customers face that may constrain their ability to service loans,” he explained.
The announcement follows the Central Bank of Kenya’s (CBK) decision on December 5 to lower the Central Bank Rate from 12 percent to 11.25 percent.
The CBK’s Monetary Policy Committee (MPC) cited stable inflation and exchange rate stability as key factors behind the decision to reduce the rate.
