Commercial banks start lowering interest rates
Last week, the Central Bank warned it would conduct on-site inspections to ensure that banks have also reduced their lending rates to the consumers
Three Kenyan commercial banks have lowered their lending rates to match the Central Bank Rate (CBR) that was lowered by the Monetary Policy Committee on February 5, 2025.
Cooperative Bank of Kenya, Kenya Commercial Bank and M-Oriental are the lenders that have so far responded by adjusting the rates downwards to allow consumers enjoy the benchmark lending.
On Monday, Cooperative Bank lowered its lending rate from 16.5 per cent to 14.5 per cent and said the adjustment takes effect immediately.
“The effective lending rate will be the Base Lending Rate of 14.5 per cent plus a margin of between 0 to 4 per cent per annum based on the individual customer’s credit profile,” the bank said in a statement.
The bank said the reduction in the lending rate is intended to stimulate credit growth to key sectors of the economy notably the Micro, Small, and Medium Enterprises (MSMEs) that are a critical engine to drive and sustain economic growth.
On Tuesday, Kenya Commercial Bank followed suit by adjusting its lending rate from 15.6 per cent to 14.6 per cent. In a public notice, the bank said although it has reduced its lending rate, the final lending rate is based on custom specific margin.
“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 notice.
KCB said the new rate applies to all existing and new Kenya shilling-denominated facilities excluding fixed-rate credit facilities.
M-Oriental, on its part, said its lending rate would drop from 16.5 per cent to 16.0 per cent and will take effect from March 1. It added that the new interest rates apply to all existing and new Kenya Shilling denominated credit facilities.
Last week, the Central Bank’s Monetary Policy Committee (MPC) reduced the Central Bank Rate (CRB) – the benchmark lending rate – from 11.5 to 10.75 per cent. It warned that it would conduct on-site inspections to ensure that banks have also reduced their lending rates to the consumers.
CBK Governor Dr Kamau Thugge said banks that fail to lower their interest rates in the latest effort to unlock cheaper credit for the business entities in the country would be fined. “The CBK may also fine banks that don’t pass on the benefits of reduced cost of funds to their customers,” Thugge said.
This was the fourth consecutive time in a row that the MPC was lowering the CBR. Commercial banks in Kenya are often accused of effecting the lending rate very fast but are very slow to reduce the interest rates when the benchmark lending rates are adjusted downwards.
