As a result, the largest bank in the East African country; Kenya Commercial Bank (KCB), With assets up to KES 1.4 trillion ($10.8 billion), recently opted to reduce its lending rate from 15.6% to 14.6%.
The decision by the bank resulted from increased pressure on commercial banks to lower lending rates in line with benchmark rate cuts.
“The final lending rate is based on a customer-specific margin, adjusted to the base rate, in line with the approved Risk-Based Credit Pricing Model,” KCB said in a statement.
“This applies to all existing and new KShs-denominated facilities and excludes fixed-rate credit facilities.”
This rate was made effective as soon as Monday, 10th of February.
The CBK has chosen a tough position against financiers who are hesitant to give their customers more affordable loans.
Governor Kamau Thugge, the head of the CBK noted on February 5 that the regulator was in the process of putting together – in-person bank inspections to ensure compliance.
Furthermore, the apex bank has established sanctions under the Banking Act that will penalize banks that do not lower rates with heavy financial daily fines.
The regulator released KES 73.7 billion ($570 million) into the economy during the February 5th monetary policy meeting by lowering the benchmark lending rate from 11.25% to 10.75% and the cash reserve ratio from 4.25% to 3.25%.
Banks, however, had been slow to adopt the new rate, pointing to increased fixed deposit expenses as a barrier.
This new stance by the bank is intended to promote lending, aid in economic recovery, and provide access to inexpensive credit while borrowers struggle with costly credit.
Lower rates may also make it easier for banks to manage the growing amount of non-performing loans, which have started to fall in important industries including manufacturing, real estate, and commerce.
This goal is backed by KCB’s move to lower its rates, which could point to a trend toward comparable steps from other lenders, as reported by TechCabal.
The announcement coincides with a 22-year low in private-sector lending in December 2024, which was attributed to expensive loans.
